Supreme Court of WA|2008-07-15|Before: Le Miere J, Beech J

For the reasons set out above, I have an equitable estate or interest in the property as the beneficiary of a resulting or constructive trust in the property.

41 I turn to the principles applicable on an application to extend the operation of a caveat.

42 Section 137 of the (WA) enables a person who claims 'any estate or interest' in land to lodge a caveat. By its nature, a caveatable interest must be a proprietary interest in land: , 50.

43 A caveat is a form of statutory injunction preventing registration of a dealing against land until the caveator has been given a reasonable opportunity to justify the caveat by pursuing such remedies as he or she may have: J and H Just (Holdings) Pty Ltd v Bank of New South Wales [1971] HCA 57; (1971) 125 CLR 546, 552, 558; Custom Credit (44 - 45); Brogue Tableau Pty Ltd v Binningup Nominees Pty Ltd [2007] WASCA 179; (2007) 35 WAR 27 [68].

44 Section 138C(2) of the Transfer of Land Act is in the following terms.

On the hearing of an application under subsection (1), the Supreme Court -

(a) if satisfied that the caveator's claim has or may have substance -

(i) may make an order extending the operation of the caveat for such period as is specified in the order;

(ii) may make an order extending the operation of the caveat until the further order of the court; or

(iii) may make such other orders as it thinks fit concerning the caveat or the land in respect of which the caveat was lodged;

(b) if not satisfied that the caveator's claim has or may have substance, shall dismiss the application; and

(c) may make such ancillary orders in relation to the application as it thinks fit.

45 It can be seen that the power of the court to make orders in favour of a caveator arises only if the court is satisfied that the caveator's claim 'has or may have substance'.

46 The 'caveator's claim' refers to the claim by the caveator of the estate or interest that is claimed in the caveat: Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd [2004] WASC 30 [17].

47 On an application for an extension, the onus is on the caveator to demonstrate that there is a serious question to be tried as to whether a caveatable interest exists: Custom Credit (48); Jandric v Jandric [1999] WASC 22 [5].

48 In an application for an extension of caveat it is not appropriate to attempt to resolve conflicts of evidence on affidavit: Porter v McDonald [1984] WAR 271, 276.

49 The caveat will not be removed unless the claim to an estate or interest in the land appears to be without foundation: Porter v McDonald (276); Custom Credit (48).

50 The balance of convenience is a factor to be considered in an application to extend the operation of a caveat. However, interlocutory removal of a caveat will be unusual where an arguable case as to the existence of a caveatable interest has been demonstrated. That is because the purpose of a caveat is the protection of a proprietary interest. Removal of the caveat will, in many cases, have the effect of destroying the benefit of the proprietary interest claimed in the caveat: Custom Credit (50).

51 On an application to extend a caveat there is a limited power to allow the terms of the caveat to be amended. Amendment may be permitted so as to enable the caveat to express better or more fully the interest which is claimed in the caveat. However, amendment is not permitted so as to alter the interest which is claimed and therefore claim a different interest: Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd [17]; Midland Brick Company Pty Ltd v Welsh [2006] WASC 122; (2006) 32 WAR 287 [397] - [399]; Devere Holdings Pty Ltd v Verge [2006] WASC 297 [22]; Benson v Benson [2008] WASC 13 [31] - [33].

52 The court has power, in the context of an application to extend a caveat, to decline to extend the operation of the caveat but to impose an injunction maintaining the status quo between the parties: Lydon v Ryding [2002] WASC 308 [22]; Lee v Mavaddat [2007] WASC 18 [37]; Powell v In De Braekt [2006] WASC 264 [10].

53 Section 137 of the Transfer of Land Act requires a caveat be in an approved form. The approved form requires the caveator to specify the estate or interest claimed. In Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22; (1991) 174 CLR 407, 423 Mason CJ, Dawson and McHugh JJ held that 'specify' should be understood in the sense of 'mention definitely or explicitly' (applying the Full Court decision in Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419, 429).

54 There are conflicting authorities on whether regard may be had to the statutory declaration in determining whether the caveat specifies the estate or interest claimed. Compare, for example, Jandric v Jandric [40] and Cruz v Osborne [1999] WASC 8, [11] - [14].

55 A caveat which is defective in form ought not to be extended, at least unless it is amended to remedy the defect: Jandric [48]; Lydon v Ryding [21]; Boni v Kingsoak Pty Ltd [2007] WASC 174 [71].

56 A claim in a caveat to 'an equitable interest' is defective in form. It fails to specify the nature and extent of the interest. Jandric [40]; Cruz v Osborne [9] - [10]; applying Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222, 230 - 232.

57 That brings me to the interest in the Property claimed by the plaintiff as supporting the caveat.

The plaintiff's claim to an interest in the Property

58 The facts on which the plaintiff's claim to an interest in the Property is based, reflected in the plaintiff's affidavits, may be summarised in the following way.

59 The defendants told the plaintiff, over many years, that if he continued to work on the farm he would inherit the defendants' interest in the farm properties from them. He was also told that the defendants' other properties, including the Property, would be inherited by the plaintiff's sisters. On the basis of that agreement or understanding, the plaintiff acquiesced in the contribution, by the partnership R & D Bashford & Son, of the sums referred to in paragraph 14 of his second affidavit (totalling $21,000) for improvements to the Property.

60 Some of those facts are, as I have said, contested by the defendants. However, in light of the legal principles I have set out, the plaintiff's claim is to be assessed on the facts revealed by the plaintiff's affidavits.

61 Those facts are said to give rise to an arguable claim, by the plaintiff, for an interest in the Property in two ways.

62 First, the plaintiff says that these facts give rise to a constructive trust in his favour in respect of his share of the partnership's contributions, by expenditure on improvements to the Property, to the value of the Property. The constructive trust is said to arise by operation of the 'general equitable principle which restores to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them'. Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137, 148; Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583, 620. The existence of the general equitable principle is not in doubt.

63 Secondly, the plaintiff submits that the facts summarised above arguably give rise to an interest in land created by an equity arising from an estoppel. The plaintiff submits, and I accept, that an equitable estoppel may arise where there is the creation or encouragement by the defendant in the plaintiff of an assumption that a contract would come into existence or a promise be performed or an interest granted to the plaintiff by the defendant, and reliance on that by the plaintiff, in circumstances where departure from the assumption by the defendant would be unconscionable: Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387; Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466, 472.

64 The plaintiff accepts that the interest which he claims is not the whole of the beneficial interest in the Property. On the plaintiff's case, the partnership contributed about $21,000 to improvements to the Property. The plaintiff claims that his interest reflects his one-third share of the partnership's contribution, namely a sum of about $7,000.

65 The defendants contributed the whole of the purchase price of $90,000.

66 The plaintiff does not accept that the respective beneficial shares in the Property would necessarily be proportionate to the respective financial contributions just set out. The plaintiff says that expert evidence would be required so as to enable an assessment to be made of the contribution to the overall ultimate value of the Property, made by the improvements, as against the value of the land and the home that was on the land when it was first acquired.

67 In the course of oral argument, counsel for the plaintiff accepted that the plaintiff's share of the beneficial interest in the Property could not realistically be expected to exceed one-sixth of the whole of the beneficial interest.

68 Thus the nature and extent of the plaintiff's claimed beneficial interest is such that, in substance, the plaintiff's claim is to a share of the proceeds of sale of the Property, the claim being secured against the Property. The claim may lead to a conclusion that the plaintiff is a beneficial co-owner of the Property, or that he has an equitable charge.

69 In oral submissions, counsel for the plaintiff identified certain species of equitable claims which the plaintiff does not rely upon. First, the plaintiff does not rely upon a common intention constructive trust. That is not surprising. On the plaintiff's case, the common intention was that the plaintiff would receive the farm and the Property would go to one or more of his sisters. There was no intention that the plaintiff would acquire any interest in the Property.

70 Secondly, the plaintiff does not rely upon a claim of a resulting trust arising from any contribution by the partnership to improvements in the Property. The plaintiff accepted that any presumption of a resulting trust arising from those payments would, on the evidence, have been rebutted.

71 Thirdly, the plaintiff does not claim that any part of the purchase price of the Property was paid by partnership funds. The plaintiff accepts that the defendants used moneys of their own in purchasing the Property.

72 I turn to the question of whether the plaintiff has established a serious question to be tried on his claim to a caveatable interest in the Property.

73 For the reasons which follow, I find that the plaintiff has established a serious question to be tried on his claim to a caveatable interest in the Property, so that the caveat 'may have substance' within the meaning of s 138C(2)(a) of the Transfer of Land Act. However, on the evidentiary material available, the plaintiff's claim to a caveatable interest in the Property appears to me to be weak. There are significant gaps in the evidence, referred to below.

74 The foundation of the plaintiff's claim to an interest in the Property is the proposition that the partnership expended funds in improving the Property.

75 The defendants' case is that the moneys spent on improvements to the Property were not partnership funds but belonged to the defendants and were part of the proceeds of sale of the Datchett Road property. In light of the evidence in paragraphs 7 to 11 of the plaintiff's second affidavit, and taking into account the legal principles applicable on an application of this kind, there seems to me to be a serious issue to be tried in this respect. In other words, the material presently available does not enable it to be firmly concluded that the expenditure on improvements came from funds of the defendants rather than partnership funds.

76 The available evidence is to the effect that the improvements were paid for from funds in the partnership's bank account. However, the evidence is silent as to the accounting treatment of the expenditure of those funds from the partnership's bank account. There is no evidence as to whether that expenditure was treated as an expense of the partnership or as a drawing by the defendants. If and to the extent that the payments were treated as drawings by the defendants, then, in my opinion, the foundation for the plaintiff's claim would fall away. For the purpose of the failed joint endeavour claim, there would have been no relevant contribution by the partnership. For the purposes of the equitable estoppel claim, it is difficult to see how the acquiescence by the plaintiff in the defendants' drawing of these funds could give rise to any detriment sufficient to support the interest claimed in the Property. The drawings by the defendants would, by definition, have been entered in the loan account of the partnership to each of the defendants as partners.

77 The absence of evidence just referred to is, as counsel for the plaintiff acknowledged in oral submissions, a significant evidentiary gap. However I have concluded, not without some hesitation, that that evidentiary gap is not fatal to the existence of a serious question to be tried. Nevertheless, that evidentiary gap is significant in my assessment of the strength of the plaintiff's claim on the evidence before me.

78 If it is accepted that partnership funds were expended to improve the Property, the question arises whether that expenditure by the partnership and not by the plaintiff personally gives rise to a caveatable interest in favour of the plaintiff. It is the contribution which founds the claim. Yet it is the partnership, not the plaintiff, which made the contribution.

79 Counsel for the plaintiff sought to overcome this apparent difficulty by inviting a conclusion that the partnership had been dissolved in or about 1992 and that, as a consequence, the equitable claim of the partnership was partnership property which had devolved to the individual partners in their respective one-third shares.

80 There are a number of difficulties with the plaintiff's contention in this respect. There is no direct evidence of the dissolution of the partnership R & D Bashford & Son. It is clear from the evidence that from about 1 July 1992 the farming operations were no longer conducted by the partnership R & D Bashford & Son but were conducted by an entity or partnership associated with the plaintiff. That was either in a partnership between the plaintiff and his wife or through the Bashford Family Trust. (The available evidence supports the latter, but for present purposes it does not matter which.) It may be open to infer that upon the partnership R & D Bashford & Son no longer conducting the farming enterprise it had no other function and was dissolved, either formally or by implicit agreement between the partners.

81 A further and, I think, more important evidentiary gap is that relating to the winding up the partnership. There is no evidence as to whether the R & D Bashford & Son partnership was wound up and, if so, on what terms. The prima facie position upon winding up is one of equality of entitlement between the partners: Partnership Act 1895 (WA) s 50 and s 57. However, it is open to the partners to have agreed to terms which would be inconsistent with the claim now made by the plaintiff that equitable rights held by the partnership, arising from its contributions to the Property, devolved to the partners in equal shares.

82 This is another significant evidentiary gap in the plaintiff's case.

83 The evidentiary gaps which I have mentioned seem to me to mean that the plaintiff's case can, at this stage, fairly be described as weak.

84 The defendants submitted that, for reasons other than the evidentiary gaps identified, there was no serious question to be tried on the plaintiff's claim. For the reasons which follow, I do not accept those submissions.

85 First, the defendants submitted that the plaintiff's primary case was that he had an interest in the farm property and that that interest was protected by the caveats over the farm property. That much may be accepted. From that, the defendants submitted, it followed that the lodgement by the plaintiff of a caveat over the Property involved 'double dipping' in proprietary terms, because the plaintiff was claiming a proprietary interest both over the farm and over the Property.

86 I do not accept that submission. The claim to an interest in the Property is an alternative to the plaintiff's primary claim to the farm property. The plaintiff has (it seems) an arguable claim to an interest in the farm. He has an arguable claim, in the alternative, to an interest in the Property. Thus there is an arguable claim to a proprietary interest in each, but not both. In circumstances where a party claims, in the alternative, an interest in property A or property B it seems to me to be open to the party to lodge a caveat against both titles.

87 The fact that the claim to an interest in the Property is a secondary alternative to the primary claim is, I think, relevant to the balance of convenience. I will return to this point when I deal with the balance of convenience.

88 Secondly, the defendants submitted that the joint endeavour (for the purposes of Muschinski v Dodds) had failed only in respect of the plaintiff's expectation of an interest in the farms. The defendant pointed out that the fact that 20 Korella Street had been transferred to one of the plaintiff's sisters was consistent with the alleged terms of the joint endeavour which would have seen the defendants' properties other than the farm being distributed to the plaintiff's sisters. Further, the defendant submits, the failure of the joint endeavour in respect of the farm is adequately protected by the presence of the caveats over the farm property.

89 In my opinion, the evidence establishes that the joint endeavour (on the plaintiff's case) has failed. It is immaterial whether the joint endeavour has failed in one respect (as to the farm) or in many respects. Once it is concluded that the joint endeavour has failed there is room for the operation of the equitable principle explained in Muschinski v Dodds. It seems to me that among the possible remedial responses to the plaintiff's equity arising from the facts on which the plaintiff relies is a claim to an interest in the Property.

90 For these reasons there is, in my opinion, a serious question to be tried in respect of the plaintiff's claim to an interest in the Property, so that the caveat 'may have substance'. However, at this stage, the plaintiff's claim appears to be weak.

92 The caveat claims an interest as 'the beneficiary of a resulting or constructive trust'. Counsel for the plaintiff accepted that the caveat fails to adequately specify the estate or interest claimed. He submitted that it should be amended to claim an interest 'as equitable co-owner' of the Property. In my opinion, the amendment proposed would still not adequately specify the interest claimed, because nothing would be said as to the extent of the interest as equitable co-owner.

93 In my opinion, the interest claimed by the plaintiff would be adequately specified by a statement to the following effect:

The nature of the estate or interest claimed by the plaintiff is as equitable co-owner or equitable chargee, to the extent of his one-third share of the interest arising from the contribution by the partnership R & D Bashford & Son to the increased value of the Property arising from the expenditure by the partnership on improvements to the Property.

94 An amendment to that effect seems to me to be permissible within the principles I have set out earlier in these reasons. The amended form of caveat spells out in more detail the interest claimed under the caveat. It does not assert a different interest to that currently claimed in the caveat.

96 In my opinion, the balance of convenience is firmly against the unconditional extension of the operation of the caveat. There are a number of considerations which lead me to that conclusion.

97 The defendants are in their 80s. They live at the Property. Their health has deteriorated significantly in the past two years or so. They wish to sell the Property to move to alternative accommodation and care that is more suited to their needs. Their doctor has advised them to do this, and they cannot afford to do so unless they sell the Property.

98 The defendants also wish to sell the Property to obtain some surplus cash to assist in financing the care that they now require, as the income they presently receive is insufficient and their health is continuing to deteriorate.

99 Counsel for the plaintiff accepted, rightly in my opinion, that the unconditional extension of the caveat, resulting in the prevention of any sale of the Property by the defendants, was an outcome to be avoided.

100 There are further matters which seem to me to be relevant to the balance of convenience.

101 The plaintiff's claim is, at best, a claim to somewhere between 6% and 16% of the sale proceeds of the Property. The size or extent of the caveator's claim is relevant to the balance of convenience: Kingstone Constructions Pty Ltd v Crispel Pty Ltd (1991) 5 BPR 11987, 11991.

102 No substantive proceedings have been commenced by the plaintiff, notwithstanding that a letter of demand was written in August 2007 and these proceedings were commenced in February 2008.

103 Further, the claim to an interest in the Property is a secondary alternative to the plaintiff's primary claim to an interest in the farm properties.

104 Finally, there is the apparent weakness of the plaintiff's case, to which I have already referred. It is well established that, on an application for an interlocutory injunction, the apparent strength or weakness of the plaintiff's case for relief at trial is a relevant consideration on the balance of convenience or risk of injustice. See, for example, Castlemaine Tooheys Ltd v State of South Australia [1986] HCA 58; (1986) 161 CLR 148, 155; Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 [65] - [71]. The principles relating to an application for an extension of a caveat are, to some degree, analogous to the principles on an application for an interlocutory injunction: Eng Mee Yong v Letchumanan [1980] AC 331, 335; Custom Credit (50). There is authority that in determining whether an extension of a caveat should be granted, when consideration is given to the balance of convenience the apparent strength or weakness of the plaintiff's case can be taken into account: Heritage Properties (No 3) Pty Ltd v Coles Supermarkets Australia Pty Ltd (1993) Q Conv R 54-448, 59424 - 59425 (Fitzgerald P and Pincus JA).

105 I do not overlook the principle, accepted in Western Australia, that interlocutory removal of a caveat will be unusual: Custom Credit (50). In my opinion, the various considerations I have mentioned make this such a case.

106 As I have said, the plaintiff accepted that unconditional extension of the operation of the caveat was inappropriate in the present circumstances. The plaintiff submitted that an appropriate order would be to make removal of the caveat conditional upon the defendants' retaining in a trust account one-sixth of the proceeds of sale of the Property. 'Taking into account the considerations to which I have referred, I do not accept that submission. Rather, it seems to me that an appropriate balance is achieved by an order to the following effect.

107 The defendants need access to the additional funds which will be released by a sale of the Property. The plaintiff's interest is in retaining security for the interest in the Property which he claims. The defendants own a two-third interest in the farm properties, over which the plaintiff has lodged a caveat. There is no challenge to the continued presence of those caveats.

108 In those circumstances, the defendants could execute an instrument which secures, against their interest in the farm properties, the plaintiff's claim presently asserted against the Property. The defendants have, by letter dated 8 July 2008, expressed a willingness to execute such an instrument. Upon the execution of such instrument, a further caveat could be lodged against the farm properties and the caveat against the Property could be removed.

109 This may be effected by ordering that the operation of the caveat over the Property be extended, subject to a condition that upon execution by the defendants of an appropriate instrument relating to the farm properties the caveat be removed.

110 The plaintiff accepted that any extension of the caveat would be conditional upon the commencement by the plaintiff of substantive proceedings within a short period of time.

111 For the reasons given I would propose orders to the following effect:

Paragraph 1 of the orders made on 2 July 2008 be discharged.
The caveat be amended so that the estate or interest claimed is in the following terms:

The nature of the estate or interest claimed by the plaintiff is as equitable co-owner or equitable chargee, to the extent of his one-third share of the interest arising from the contribution by the partnership R & D Bashford & Son to the increased value of the Property arising from the expenditure by the partnership on improvements to the Property.

Subject to paragraph 4 and 5 below, the operation of the caveat be extended until further order in the proceedings referred to in paragraph 4.
It is a condition subsequent to the continuation of the order in paragraph 3 that within 14 days of the date of these reasons, the plaintiff commence proceedings in this court by writ of summons for the purpose of determining the plaintiff's claims to an interest in the Property. The plaintiff should also apply for those proceedings to be in the CMC list.
Upon the execution by the defendants of an instrument securing the plaintiff's claim to an interest in the Property against the defendants' interest in the farm property in a form acceptable to the plaintiff or approved by the court, the caveat be removed.
There be liberty to apply on three days' written notice in respect of order 5.

112 I would hear from the parties as to the precise form of orders to be made and as to costs.

BASHFORD -v- BASHFORD [2008] WASC 138 (15 July 2008)

BASHFORD -v- BASHFORD [2008] WASC 138 (15 July 2008)

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BASHFORD -v- BASHFORD [2008] WASC 138 (15 July 2008)