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[2008] WASC 13
Supreme Court of WA
2008-02-04
Murray J
Original judgment source is linked above.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION : BENSON -v- BENSON [2008] WASC 13
Practice and procedure - Application to extend operation of caveat - Limits of power to amend caveat - Test for grant of relief - Whether an arguable case for interest in land by way of contract or constructive trust
1 On 26 October 2007 the plaintiff applied for an order extending the operation of caveat no K296745C which had been lodged originally on 7 August 2007. As I understand it, this was a caveat to which the Transfer of Land Act 1893 (WA) s 138A applied. It was therefore a caveat which under s 138B might be the subject of a notice by the registrar to the caveator that unless an order was obtained from the court extending the operation of the caveat, it would lapse 21 days after the day upon which the notice was served. As I understand it, such a notice was served and the timing required the application to extend the life of the caveat to be brought on as a matter of some urgency.
2 I first heard the application on 29 October 2007. It was then supported merely by an incomplete affidavit sworn by the plaintiff to which, by then, the first defendant had had no opportunity to respond. Given the incomplete state of the proceedings, I made an interim order extending the caveat for a period expiring at the close of business on 21 November 2007. The application was re-listed for that day and then came on for hearing upon the basis of affidavit evidence put on by both the plaintiff and first defendant in accordance with programming orders I made on 29 October. At no stage was there any appearance by the second defendant, the registrar.
(2) 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.
4 At the conclusion of the hearing I made a number of orders. In the first place, I ordered the amendment of the caveat to assert an interest by the caveator by way of constructive trust. I made that order under s 138C(2)(a)(iii) as an order 'concerning the caveat'. As so amended, I extended the caveat for a period of four months, expiring on 21 March 2008, with liberty to the parties to apply generally on 48 hours' notice. In so doing I exercised the power under s 138C(2)(a)(i). I then made a number of orders ancillary to that extension of the caveat, acting under s 138C(2)(c).
5 I required the plaintiff to file and serve any writ of summons which was proposed, with a statement of claim annexed, on or before 21 January 2008. As soon as practicable thereafter, I ordered the parties to provide informal discovery mutually to each other and in the meantime, whether with or without the benefit of those processes, I required the parties to enter into court based mediation under the Rules of the Supreme Court 1971 (WA), O 29 in the hope that the parties could be brought together in a way best calculated to achieve a settlement of the dispute between the parties who are members of the one family, before any substantial costs are incurred.
6 Under s 137(1) of the Transfer of Land Act, a caveat may be lodged by:
[a]ny beneficiary or other person claiming any estate or interest in land under the operation of this Act or in any lease mortgage or charge under any unregistered instrument document or writing or under any equitable mortgage or charge by deposit without writing or by devolution in law or otherwise ...
7 This caveat purported to be supported by a claimed interest in the land. The land is a small property known as 10 Alexander Street, Centennial Park, Albany. It is the whole of the land contained in Certificate of Title Vol 1922 folio 476. There is an old house erected on the land. In 1992, the plaintiff and his wife made an offer to purchase the property for $48,000, which offer was accepted by the then owner. As things developed, the purchasers became the plaintiff's parents Peter Bernard Benson and the first defendant. The house on the property was then the subject of a demolition order and it needed substantial renovation and the removal of that order if it was to be occupied by the plaintiff's parents.
8 The property had been transferred to Mr and Mrs Benson senior as joint tenants. When Mr Peter Benson died on 17 July 1998, the first defendant became the sole registered proprietor by right of survivorship. Prior to the death of the plaintiff's father, his parents had both resided in the house on the property. How that came about is a matter to which I shall refer shortly in a little more detail. But at this stage it is sufficient to note that the first defendant no longer lives there. She is now an old lady aged 80 years. She is physically frail and has dementia. She resides permanently in a nursing home at Emu Point in Albany. She is happy with that placement.
9 In 1999, under s 104 of the Guardianship and Administration Act 1990 (WA), before her dementia had progressed so far as now exists, she executed an enduring power of attorney in favour of her daughter Marline Grogan and her son-in-law Vincent Grogan, who have placed before the court a certificate provided by the first defendant's medical practitioner, Dr Leighton, dated 2 May 2007 testifying that in the doctor's opinion, the first defendant's mental capacity had declined to the point where she was no longer able to make informed decisions about her financial affairs. The doctor expressed the opinion that it was time for the power of attorney to be activated.
10 Pursuant to that power of attorney, and following that advice, it seems that Mr and Mrs Grogan decided that the property should be sold. By letter dated 14 June 2007, received on 19 June, the first defendant's solicitors wrote to the plaintiff offering him the first option to purchase the property for $490,000. In what seems to me to be clearly an unreasonably short time, the exercise of the option by 22 June was offered, with settlement of the purchase of the property to be effected on 20 July. Failing the exercise of the option the property was to be offered for sale generally. According to the plaintiff, he and his sister and her husband have been estranged for some time. That would seem to explain the rather unusual approach.
11 However that may be, the plaintiff's claim made in support of the caveat was, before amendment, 'as a person who is entitled to receive a portion of the proceeds of the sale of the land' under an agreement asserted to have been made in about February 1993 between the plaintiff and his parents, that upon the sale of the property, he 'would be repaid for his efforts and financial contribution to the renovation of the Property'. The statutory declaration goes on to assert that when the property was purchased between October 1992 and February 1993, the plaintiff paid significant amounts of money in relation to the acquisition of the property and its renovation, as well as contributing labour. He then says in the statutory declaration that when the renovations were complete his 'parents' told him that because of his significant financial contribution and because the renovations had taken longer than anticipated, 'I would be repaid for my efforts and my financial contribution when the Property was sold'.
12 In his first affidavit sworn on 25 October 2007, the plaintiff having described the work done and his expenditure of about $15,000 on the renovations, says simply in pars 35 and 36 that 'my father' told him he would be repaid for his efforts and financial contribution. There is no reference there to statements having been made by both parents, but the plaintiff adds that he was told by his father that if his parents decided to sell the property (which as I have noted they did not), 'I would be offered the first option to purchase it and that the purchase price would be the market value less an amount that equated to the labour and financial assistance that I have contributed to the renovation works'.
13 In his affidavit sworn on 2 November, shortly after the first hearing, the plaintiff adds that his brother Peter helped with the renovations and made a financial contribution to the purchase of the land. He says his brother Carl assisted but was paid by Mr and Mrs Benson senior for his labour. The plaintiff then says in par 24:
My father stated that Peter and I would be looked after when the property was sold once he and my mother were gone and no longer needed the property.
That is of course a rather different version from that given in the first affidavit and adds a reference to the death of both parents and the consequent sale of the property by the trustee of the survivor's estate. Further, the 'interest' of Peter is mentioned for the first time and it will have been noted that there are no proceedings before the court involving Peter.
14 The plaintiff seeks to explain that by saying that his understanding is that his brother Peter is provided for in his mother's will, 'to the extent that he is to be repaid for his contribution to my parents' previous property'. The plaintiff says (inadmissibly) that Peter has told him that their father told Peter that the plaintiff was to be given the option to buy the property, 'at a reasonable price taking into account my contribution to the property during the renovation works'.
15 As to price, I have mentioned briefly the terms of the option recently provided on the instructions of Mr and Mrs Grogan, an option rejected by the plaintiff who notes that the price is too high and not in accordance with the undertaking given by his father. In addition, he says that he had insufficient time to investigate his capacity to take up the option and he notes that the house is currently on the market for the sum of $459,000.
16 He annexes an odd document. It is an offer and acceptance form. The plaintiff says it was provided to him by a solicitor acting on his mother's instructions. It is in the sum of $250,000. The plaintiff apparently thought the sale price should be $230,000. He redrew the contract with the amended price and returned it to his mother. It seems she amended that document to restore the price to $250,000. There is no clear explanation about that exchange, but it seems clear that no contract was ever made in those terms and in the final outcome there appears to be no claim advanced in support of the caveat arising out of what occurred in 2005.
17 As to the plaintiff's understanding about a provision made for his brother Peter in the first defendant's will, a copy of a document dated 19 January 1998, before the execution of the power of attorney, is annexed to the affidavit sworn jointly by Mr and Mrs Grogan. The document is drawn by solicitors, apparently, I infer, as one of two mutual wills drawn by Mr Benson senior and Mrs Benson. It will be recalled that Mr Benson senior died on 17 July 1998 according to the evidence before me. Mrs Benson's will gives all of her estate to her husband if he survives her. In the event that he predeceased her, Mrs Benson makes a number of specific bequests, including one of $30,000 to her son Peter, 'in compensation for land given by him to me and my husband'. That generally accords with what the plaintiff understood to be the position but the bequest is restricted to what the plaintiff describes as the proceeds of the sale of a vacant block of land.
18 There is a gift over to her children Bernard, Peter, Carl, Maxine Lloyd, Laurence and Marline Grogan. Each of the six children is to take a one-seventh share of the estate. The remaining seventh share is divided equally between two grandchildren, Ryan Fitzgerald and Paul Fitzgerald.
I EMPOWER my Executor to permit my son BERNARD JOHN BENSON to purchase my matrimonial home at 10 Alexander Street, Albany at an independently ascertained valuation price provided that he exercises his option to purchase within twenty one (21) days from the date of my death and that settlement occurs for the full purchase price within in 2 months of probate being granted for my estate.
20 It will be noticed that in part this seems to accord with what the plaintiff says, on one account at least, is his understanding of the agreement to which he had come with his father, as he thought on behalf of both of his parents. It apparently records a commitment made to take effect on the death of the surviving parent and so not if they decided to sell the property, which is the version of the agreement relied upon in the plaintiff's first affidavit and the statutory declaration he made in support of the caveat. Nor is it a provision which reflects an agreement to offer him the property for a fair market value less an amount equal to the value of his labour and financial assistance contributed to the renovations originally made. In one sense the clause of the will is more in tune with the reference in the plaintiff's affidavit sworn on 2 November 2007, par 24 of which states:
My father stated that Peter and I would be looked after when the Property was sold once he and my mother were gone and no longer needed the Property.
21 There is a considerable debate on the face of these affidavits and a later affidavit sworn on 15 November 2007 by the plaintiff as to the work which was done in renovating the property, the role performed by the plaintiff, who helped when and with what part of the work, and what costs were incurred. It is impossible of course to resolve these issues on the face of the affidavits, but in any event, in my view, it would be irrelevant to do so for present purposes.
22 The law in relation to the grant of an application such as this may for present purposes be stated in summary form. As in the case of an application under s 138, when an application is made under s 138C(1), because of the way the section is worded, the onus rests upon the applicant caveator to demonstrate that there are grounds for relief within s 138C(2)(a) and (b). The applicant must satisfy the court that its claim made by the caveat has or may have substance. If not so satisfied, the court is to dismiss the application, but if so satisfied that there is, or may be substance in the claim upon which the caveat is grounded, then the court has a discretionary power to make an order extending the operation of the caveat and to make such other orders concerning the caveat as it thinks fit. The court may take the view that even if the caveat is supportable, no such order extending its operation should be made.
23 It is that sort of consideration which has long led the courts to liken the grant or refusal of relief under these sections to the process of grant or refusal of an interlocutory injunction. The tests for relief may be expressed in the same way, and so it is often said that in a case such as this, the operation of the caveat may be extended if the claim upon which it is based has or may have substance in the sense that there is an arguable case that there is a serious question to be tried as to the existence of a caveatable interest. However, as I have said, having regard to the discretionary nature of the power to make orders, the court will have regard to the balance of convenience or, as it is sometimes put in the context of the grant or refusal of an interlocutory injunction, the question where lies the greatest danger of injustice.
24 Nonetheless, the court will not overlook the fact that it is concerned with the interim maintenance of the plaintiff's arguable caveatable interest pending the final resolution of the issue at trial or otherwise. If relief is refused, the result may be the destruction of the interest. This case has the potential to provide such an example. If relief is refused, the property may be sold and the proceeds dissipated by, or on behalf of, the first defendant. The leading authority in relation to the points made above, is Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 per Owen J, with whom Malcolm CJ and Walsh J agreed, at [48] - [50].
The caveator's claim - has it or may it have substance?
25 The basic claim made by the caveat as has been seen, is an interest by way of an entitlement to receive a portion of the proceeds of the sale of the land. In other words, what is claimed is an interest in the land equivalent to part of the proceeds of its sale or part of its value. By the caveat, the statutory declaration and the affidavit evidence, that is said to arise by way of an agreement, an agreement made orally and informally between the plaintiff and his father, speaking, so the plaintiff assumes, on behalf of both registered proprietors, the plaintiff's father and the first defendant.
26 Presumably the assertion is that the agreement insofar as it was to convey the land to the plaintiff or provide him with an option to acquire it, is enforceable, although not evidenced in writing, because of part performance of the agreement by the plaintiff if it is considered that his payment of moneys and provision of labour to aid the process of renovation was conditional upon the agreement to provide an option or convey the land. As a matter of fact, upon the evidence before me, the argument may be available, but it would be very weak.
27 In my view, a contractual claim, which may of course be sufficient to create a caveatable interest in the land, is enormously difficult to sustain in this case, whichever view one takes of the nature of the agreement upon which the plaintiff would rely. An agreement to compensate the plaintiff out of the proceeds if and when the property is sold during the life of the plaintiff's parents, seems to me to be the antithesis of an agreement to provide the plaintiff with a present equitable interest in the land. Similarly, I am unable to see how an agreement upon the sale of the land to offer the plaintiff the first option to purchase it for its market value less an unstipulated sum to compensate the plaintiff for his work and financial expenditure on the renovations, could create any interest in the land, or any more than a contractual right to take up an option to acquire the legal interest in the land at some time in the future.
28 Even more remote would be an agreement such as that canvassed in the evidence, to provide some benefit in the will of the surviving parent to compensate the plaintiff by providing an instruction to the executor of the deceased's estate to offer the plaintiff an option to purchase the land. In whatever form relating to the land such an agreement was made, I cannot see how it may be said to be more than a promise to make a will in favour of the plaintiff in a particular form.
29 So far then as it is asserted by the caveat and the supporting statutory declaration that there is a contractual basis for the claim of an equitable interest in the land arising out of an entitlement to share in the proceeds of the disposition of the land by one or other, or both, of the plaintiff's parents, I can find no arguable basis or any serious question to be tried in support of the claim of a caveatable interest.
30 When I made those tentative views clear during argument, the question arose whether the caveat could be amended so as to assert a caveatable interest arising directly out of the expenditure of funds and the performance of work in renovating the property of which the plaintiff's parents were then the registered proprietors. The argument would be that the agreement between the parties, albeit informally made, was such as to create in the plaintiff an equitable interest in the land by way of constructive trust, arising at least when it was proposed to sell the land, to the extent of the portion of the value of the land contributed by the work and expenditure made by the plaintiff upon the renovation of the dwelling constructed thereon.
31 The first question was whether the power of amendment derived from s 138C(2)(a)(iii) was adequate to permit the amendment of the caveat to make such a change in the particularisation of the nature of the equitable interest asserted in the land. I held it was, relying on a series of cases such as Hayes v O'Sullivan [2001] WASC 55; (2001) 24 WAR 40, Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd [2004] WASC 30 (Le Miere J) and Midland Brick Co Pty Ltd v Welsh [2006] WASC 122 (Hasluck J).
32 I discussed these cases and came to a conclusion about the law in Devere Holdings Pty Ltd v Verge [2006] WASC 297 where, on different facts, I refused leave to amend because of the fundamental change which, by amendment, it was sought to make to the nature of the caveatable interest asserted.
33 However, having reviewed the authorities, I discerned a general principle in respect of the power of amendment provided by s 138(2) and s 138C(2)(a)(iii). I thought that power could be stated in the same terms and said that:
[T]he court is concerned with a power to amend so that the caveat (as opposed to any supporting statutory declaration) expresses with more facility the caveatable interest relied upon. The power of amendment cannot, in my opinion, be exercised so as to abandon the support of that caveatable interest and substitute for it another caveatable interest of a different kind.
34 Applying that principle to this case, I considered it to be proper to make the amendment sought upon which it was necessary for the plaintiff to rely if he was to persuade me that there was a serious question to be tried as to the existence of a caveatable interest.
35 The assertion in the end was that it was the common intention of both the plaintiff and his parents as the registered proprietors of the land, that when the senior Mr and Mrs Benson had no further use for the property, either by reason of their deaths or otherwise, the work and expenditure of the plaintiff on the property would be recognised either by permitting him to share in the proceeds of any sale or by giving him the option to purchase the property at a price which gave him a credit for the value of what he had already expended in work and money on bringing the property to the state that it was in at the time when it was the residence of Mr and Mrs Benson senior.
36 It would be unconscionable, so it was argued for the plaintiff, that the plaintiff should not be able to share in the property, at least to that extent. That gave him an equitable interest by way of a constructive trust or, putting it another way, the plaintiff's parents, or now his mother, would be held to be estopped from denying the plaintiff's interest and taking the full benefit of the legal and equitable interests in the land.
37 Of course, a constructive trust may be held to arise if there is no preferable convenient way of recognising the claim of the plaintiff, purely by way of a remedy, on the ground that it would be unconscionable to deny the plaintiff's interest regardless of the intentions of the parties, or even contrary to their intentions: Kais v Turvey (1994) 11 WAR 357. It may be that in those circumstances the purely remedial character of the imposition of the trust may make it possible to deny the existence of the trust and the equitable interest in land until the remedy is provided by curial declaration.
38 However, at least where the trust arises constructively out of the common intention of the parties, it is now, I think, settled that the trust is truly of the character of a proprietary interest in the property: Giumelli v Giumelli (1999) 197 CLR 101 per Gleeson CJ, McHugh, Gummow and Callinan JJ at 112 [3] - [6]; in de Braekt v Powell [2007] WASCA 55; (2007) 33 WAR 389 where at 407 [26], Buss JA summarised the position by holding that, 'A "common intention constructive trust" arises simultaneously with the conduct which gives rise to its imposition'.
39 It is a common intention constructive trust which is, in truth, relied upon by the plaintiff in this case. I am satisfied therefore that it may be held that the claim has, or may have, substance so as to confer upon the plaintiff an equitable interest in the land, a caveatable interest capable of protection in that way.
40 There being no countervailing matter to be considered under the heading 'balance of convenience' which might reasonably cause me to deny the plaintiff the relief sought, I made the orders amending the caveat and extending its operation in the particular terms mentioned above. However, as I have already said, this seems to me to be a case where early negotiation in the context of court-based mediation should lead to the resolution of the dispute, not necessarily by allowing the plaintiff to purchase the land, but perhaps by allowing the caveat to be removed to permit a sale, from the proceeds of which the plaintiff might be reasonably compensated for the $15,000 he says he expended on the property (if that be established) with perhaps some additional small allowance for his time and effort, given that the renovation work on the property generally was undoubtedly largely contributed by various family members, perhaps with the guidance of the plaintiff, out of natural love and affection without the intention that compensation should be provided. It was for those reasons that I made the orders to which I have referred above.
(1992) 8 WAR 42
(2001) 24 WAR 40
(1994) 11 WAR 357
(1999) 197 CLR 101
(2007) 33 WAR 389