Supreme Court of WA|2007-02-05|Before: Roberts-Smith J, Hasluck J

LEE -v- MAVADDAT & ANOR [2007] WASC 18 (5 February 2007)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : LEE -v- MAVADDAT & ANOR [2007] WASC 18

Conveyancing - Caveats against dealings - Application for extension of caveat - Whether caveator acquired an equitable estate or interest in subject property by way of a constructive trust - Question to be determined is whether the plaintiff has a caveatable interest in the land - Whether sufficient evidence before Court to infer that funds misappropriated from caveator were invested in the subject land - Caveator's case held to be speculative - Caveator unable to make out an arguable case for a caveatable interest in the land by way of constructive trust - Application to extend caveat dismissed - Turns on own facts

Butler v Fairclough [1917] HCA 9; (1917) 23 CLR 78

Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42

Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129

J & H Just (Holdings) Pty Ltd v Bank of New South Wales [1971] HCA 57; (1971) 125 CLR 546

Jandric v Jandric [1999] WASC 22

Lee v Mavaddat [2005] WASC 68

Lee v Mavaddat [2005] WASC 68(S)

Lydon v Ryding & Anor [2002] WASC 308

Porter v McDonald and Registrar of Titles [1984] WAR 271

1 HASLUCK J: The plaintiff, Kyung Hee Lee, has applied to extend the operation of caveat number J957767 which was lodged at the Department of Land Information on 19 October 2006. The application to extend is opposed by the first defendant. I understand that the second defendant, the Registrar of Titles, will abide by any order made by the Court.

2 The plaintiff's application to extend is supported by her own affidavit sworn 2 January 2007. Exhibited to the affidavit is a copy of the judgment of Roberts-Smith J which was delivered on 29 April 2005 in the matter of Lee v Mavaddat [2005] WASC 68. The 2005 judgment is a useful point of reference in tracing the history of the relationship between the parties and the circumstances giving rise to lodgement of the subject caveat. I will turn to these matters shortly.

3 The first defendant relies upon her own affidavit sworn 9 January 2007, the affidavit of her husband, Michael Moojan Mavaddat, and the affidavit of Shane Arlington Jacob. The two latter affidavits were each sworn on 9 January 2007. For ease of reference, having regard to his central role in the controversy, I will call the first defendant's husband "Mr Mavaddat".

4 It will be useful to begin by looking at the background to the present dispute.

5 The 2005 judgment reveals that in May 1999 the plaintiff and Mr Mavaddat entered into an agreement for the acquisition, development and sale for profit of a property situated at 237-241 Hay Street, Subiaco. The agreement was said to include terms that the parties would incorporate a company to advance the agreed purpose, they would each be directors and hold 50 per cent of the issued shares in the company, they would jointly borrow $1,650,000 to fund the purchase price and costs, they would mortgage properties owned by them respectively known as the "South Perth property" (which belonged to the plaintiff) and the "Applecross property" (which belonged to Mr Mavaddat). Mr Mavaddat was to conduct negotiations in relation to the price and terms on which the Subiaco property was to be acquired.

6 The plaintiff pleaded that a relationship of trust and confidence was brought into existence in relation to the parties involvement in the project with the result that Mr Mavaddat owed fiduciary duties to the plaintiff to act in good faith and to refrain from securing for himself any benefit to the exclusion of the plaintiff.

7 It is not necessary for present purposes to traverse all the issues raised by the pleadings in the earlier proceedings or touched upon in the 2005 judgment. In essence, the plaintiff's case was that as a consequence of steps taken by Mr Mavaddat the St George Bank Ltd advanced funds to the plaintiff for a period of 12 months which were secured by a registered mortgage over the plaintiff's South Perth property only. These funds were credited to the company's account and utilised in various ways which amounted to a breach of fiduciary duties owed by Mr Mavaddat to the plaintiff. The plaintiff advanced claims also of unjust enrichment and breach of duty of care in relation to the Subiaco property project and certain commission payments referable to a so-called commission agreement.

8 It appears from the 2005 judgment that settlement of the Subiaco property occurred around 21 January 2000. In April or May 2000 Mr Mavaddat purchased a property known as 817 Canning Highway, Applecross and moved the office of a business he was associated with to those premises. About 15 June 2001, by which time the parties had fallen out, the plaintiff took steps to place the company in question, Ark Securities Pty Ltd, into liquidation. The Subiaco property was eventually sold for approximately $630,000.

9 In describing the relief sought, Roberts-Smith J observed at [546] that the plaintiff had claimed equitable compensation, orders for the payment to her of all monetary benefits received by Mr Mavaddat from Ark Securities by which he was unjustly enriched at her expense, damages pursuant to s 79 of the Fair Trading Act 1987 (WA), for breach of contract and for negligent mis-statement. She claimed also an order that Mr Mavaddat account for all unauthorised expenditure of partnership funds. In the end, his Honour held that the plaintiff had made out her case against Mr Mavaddat and there was to be judgment for the plaintiff.

10 As appears from a supplementary decision handed down on 7 July 2005, being Lee v Mavaddat [2005] WASC 68(S), his Honour eventually ordered that there be judgment for the plaintiff in the sum of $2.2 million (in round figures) with ancillary orders concerning the bringing to account of any amounts recovered by the plaintiff from the liquidator of Ark Securities Pty Ltd.

11 In addition, his Honour dealt with a claim that Mr Mavaddat held the property at 817 Canning Highway, Applecross on trust for the partnership. In the course of resolving this issue, his Honour observed that where a fiduciary makes a profit out of his relationship, he will become a constructive trustee of that profit or all of the properties so acquired by him. See Jacobs Law of Trusts in Australia (6th ed) at [208]. His finding was that Mr Mavaddat took advantage of the partnership assets and used them to purchase the property in his own name. The primary position therefore was that the subject property should be regarded as being held on trust by him for the benefit of the partnership.

13 In her affidavit sworn 2 January 2007, the plaintiff referred to and placed reliance upon the events and findings the subject of the earlier litigation and the 2005 judgment. She said that Mr Mavaddat misappropriated over $800,000 from the partnership and this led to the handing down of the 2005 judgment in her favour which included an order that he pay her $2.2 million. She said that included in the misappropriated sum of $800,000 were drawings totalling $487,000 and no explanation had ever been given by Mr Mavaddat as to what became of those moneys.

14 The plaintiff went on to say that Mr Mavaddat and his wife (the first defendant in these proceedings) lived at 28 Simpson Street, Applecross, being a property which they still own. The plaintiff said that in August 2004, Mr Mavaddat and the first defendant contracted to buy an investment property for $1.45 million known as 8 Bateman Road, Mt Pleasant being more particularly Lot 19 on Diagram 78182 being the whole of the land comprised in Certificate of Title Volume 1880 Folio 124. This was referred to as the "Bateman property".

15 The plaintiff said that on 22 December 2004 the Bateman property was transferred to Mr Mavaddat and Mrs Mavaddat as joint tenants with the agreed purchase price of $1.45 million being funded by a cash deposit of $290,000 paid by Mr Mavaddat or an entity associated with him and a loan of $1.16 million from HSBC Bank Australia Ltd ("HSBC") secured by a first mortgage to HSBC.

16 The trial in respect of the earlier proceedings was commenced on 8 November 2004 and the judgment was handed down on 29 April 2005. In June 2005 the plaintiff's solicitors conducted a search of the title of the Bateman property and established that it was "subject to dealing". On 10 June 2005 Mr Mavaddat transferred his half interest in the Bateman property to Mrs Mavaddat with the result that the first defendant is now the sole registered proprietor of the Bateman property.

17 I note in passing that it now appears to be common ground that the transfer was dated not 10 June but 10 April 2005.

18 A copy of the relevant transfer J317208 effecting the transfer of the property into the first defendant's name alone was exhibited to the plaintiff's affidavit. The consideration is described as $725,000. Exhibited to the affidavit also was a true copy of mortgage J317209 being a mortgage of the Bateman property by the first defendant as mortgagor in favour of HSBC as mortgagee.

19 It is said by the plaintiff at [20] of her affidavit that on 1 June 2006 the Sheriff of the Supreme Court concluded his execution in respect of the 2005 judgment and reported that Mr Mavaddat had no assets to execute against to satisfy the judgment.

20 It was against this background that on 19 October 2006 the plaintiff placed the subject caveat J957767 on the title to the Bateman property. On that part of the form concerning the estate or interest being claimed it is said that a constructive trust is claimed over the land as outlined in an attached statutory declaration dated 16 November 2006.

21 The plaintiff's statutory declaration refers to her first language being Korean and her understanding of written and spoken English being limited. The statutory declaration goes on to describe the history of the relationship between the plaintiff and Mr Mavaddat including reference to over $800,000 allegedly misappropriated by Mr Mavaddat from the partnership which moneys were the moneys that the plaintiff had loaned to Ark Securities. The statutory declaration concludes in this way:

"10. Included in the aforesaid misappropriated $800,000, were drawings totalling $487,000 and no explanation has ever been given by Mr Mavaddat as to what became of those monies.

11. On 15 June 2001, Ark was placed in voluntary liquidation.

12. In August 2004, Mr Mavaddat and Mrs Mavaddat contracted to buy an investment property for $1.45 million, namely the Bateman Property.

13. On 22 December 2004 the Bateman Property was transferred to Mr Mavaddat and Mrs Mavaddat as joint tenants, the purchase price of $1.45 million being funded by a $290,000 cash deposit paid by Mr Mavaddat or an entity associated with him and a loan of $1.16 million from HSBC Bank Australia Ltd ("HSBC") secured by a first mortgage to HSBC.

14. It is my belief that the source of the entire $290,000 deposit for the acquisition of the Bateman Property was part of the aforesaid misappropriated $487,000 and that no part of the deposit came from Mrs Mavaddat.

15. On 10 April 2005, Mr Mavaddat transferred his half interest in the Bateman Property to Mrs Mavaddat with the result that Mrs Mavaddat is now the sole registered proprietor of the Bateman Property in circumstances where I believe that Mrs Mavaddat paid no consideration for the 50% interest in the Bateman Property transferred to her.

16. On 1 June 2006 the Sheriff of the Supreme Court concluded his execution in respect of the Judgment pursuant to a Property (Sale and Seizure) order number 241 of 2005 and reported to the effect that Mr Mavaddat had no assets to execute against to satisfy the Judgment. In the circumstances I believe that pursuant to s.40(d)(ii) of the Bankruptcy Act 1966 Mr Mavaddat committed an act of Bankruptcy on 1 June 2006.

17. I verily believe that Mrs Mavaddat is the recipient of misapplied Trust property, namely the Bateman Property purchased in part with the aforesaid misappropriated funds.

18. Mrs Mavaddat paid no consideration for the acquisition by her of her initial 50% interest in the Bateman Property in 2004 nor for the acquisition by her of Mr Mavaddat's 50% interest in the Bateman Property in April 2005.

19. Mrs Mavaddat has been unjustly enriched at my expense in circumstances where Mrs Mavaddat was not a purchaser for value of her interest in the Bateman Property.

20. In all the circumstances, Mrs Mavaddat holds her interest in the Bateman Property on a constructive trust for me."

22 It will be apparent from the narrative to this point that the plaintiff contends that moneys belonging to her were misappropriated by Mr Mavaddat in circumstances giving rise to a constructive trust and such funds can be traced into the Bateman property in circumstances which permit the plaintiff to assert a claim for an equitable interest in the land as constructive trustee.

23 In other words, it is said that, as a consequence of Mr Mavaddat's unconscionable conduct, the plaintiff acquired an equitable estate or interest in the Bateman property by way of a constructive trust (being land acquired by him partly with funds misappropriated from the plaintiff). The plaintiff's beneficial interest in the land might possibly have been extinguished if Mr Mavaddat had sold the land to a bona fide purchaser for value without notice of the plaintiff's prior equity, but in fact he transferred his interest in the property to his wife, being a person who did not fit that description, because she did not provide any consideration or value for Mr Mavaddat's half share in the property. The plaintiff's affidavit contains an assertion at [15] that, based on and because of the timing and the circumstances, the plaintiff believes that the source of the entire $290,000 deposit for the acquisition of the Bateman property was part of the allegedly misappropriated $487,000 and that no part of the deposit came from Mrs Mavaddat.

24 I digress briefly to note that counsel for the first defendant objected to this passage in the plaintiff's affidavit upon the basis that it was argumentative and speculative. However, I was not pressed to rule upon that objection because the disputed paragraph arguably had the effect of narrowing the plaintiff's claim to an assertion that the matter in issue was the source of the deposit paid for the land. I will return to this aspect of the matter in due course.

25 I note also that counsel on both sides accepted, having regard to the principles concerning constructive trusts enunciated by Roberts-Smith J in the course of his supplementary judgment, that where a fiduciary makes a profit out of his relationship he will become a constructive trustee of that profit or all of the property so acquired by him. However, the crucial question in the present case was whether the plaintiff could make out a reasonably arguable case that the Bateman property had in fact been acquired with funds misappropriated from the plaintiff.

26 Put shortly, the plaintiff's claim to an equitable estate or interest in the Bateman property by way of constructive trust proceeded from the premise that Mr and Mrs Mavaddat had no funds of their own. Thus, it was open to the Court to infer that funds used by them to acquire the Bateman property (other than funds advanced to them by HSBC) were funds belonging to and held on trust for the plaintiff having regard to Mr Mavaddat's breach of the fiduciary duties owed to the plaintiff. The Court was also urged to infer, having regard to the nature of the relationship between the parties and the timing of the Bateman property transactions, that the first defendant could not be characterised as a bona fide purchaser for value without notice with the result that her equity in the land was held subject to a constructive trust in favour of the plaintiff in respect of the misappropriated funds.

27 I pause here to make two points in passing. First, I must keep steadily in mind that, for present purposes, it is immaterial that a sizeable amount is due to the plaintiff pursuant to the 2005 judgment. The lodgement of a caveat cannot be used as a means of enforcing a judgment debt. The question to be determined is whether the plaintiff has a caveatable interest in the land. She cannot point to any agreement made with her by the first defendant as the registered proprietor of the Bateman property, establishing or evidencing the existence of a caveatable interest. Thus, the further or ancillary question to be determined is whether the plaintiff has placed sufficient evidence before the Court from which it can be inferred (at least to the level of a reasonably arguable case) that she has a caveatable estate or interest in the land by way of constructive trust.

28 Second, although this point was not the subject of debate at the hearing before me, the circumstances suggest that HSBC's registered mortgage will take priority over any equitable estate or interest substantiated by the plaintiff, to the extent of the mortgagee's claim upon the subject property, because HSBC did not have notice of the plaintiff's claim by way of caveat or otherwise at the time the mortgage was lodged. Thus, in practical terms, the plaintiff's claim, and any caveat lodged pursuant to it, essentially concerns the first defendant's equity in the land; that is, the first defendant's entitlement to the value remaining in the land after discharge of the mortgage.

29 Before returning to the evidentiary issues, it will be useful to look at the statutory provisions and legal principles bearing upon the issues before me and an application to extend a caveat.

30 A person who acquires or charges land under the Torrens system, bona fide and for consideration, will be subject only to those interests he or she can discover from a search of the register. The principal exception to this concept of indefeasibility is fraud. In addition, the caveat system is a means of warning persons proposing to deal with the subject land of the presence of an unregistered equitable interest and of enabling the equitable claimant to protect his claim by bringing an action if his claim be disputed. Failure to lodge a caveat in circumstances which induces a claimant later in time to act to his prejudice may result in the claimant first in time losing priority: Butler v Fairclough [1917] HCA 9; (1917) 23 CLR 78; J & H Just (Holdings) Pty Ltd v Bank of New South Wales [1971] HCA 57; (1971) 125 CLR 546.

31 Section 137 of the Transfer of Land Act 1893 (WA) provides that any person claiming "any estate or interest in land" under any unregistered instrument, document or writing may lodge a caveat in an approved form forbidding any dealing with the land.

32 Section 138B allows for a notice to be served upon the caveator to the effect that unless the caveator obtains an order from the Supreme Court extending the operation of the caveat within 21 days or such a period as is specified in the order the caveat will lapse.

33 Section 138C(2) provides that the Supreme Court may make an order for extension or such other orders as it thinks fit concerning the caveat if it is satisfied that the caveator's claim has or may have substance.

34 In Jandric v Jandric [1999] WASC 22 Commissioner Buss QC said at [24] - [26] that an application for extension must demonstrate on the evidence that his claim to a caveatable interest in the land raises a serious question to be tried. If there is a serious question to be tried, the question will not, except in the most exceptional circumstances, be determined on originating summons as it is not appropriate to attempt to resolve conflicts of evidence on affidavit: Porter v McDonald and Registrar of Titles [1984] WAR 271 at 276; Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129 at 141.

35 It follows from the decided cases that the jurisdiction to remove a caveat should not be exercised unless the case is one in which it is clear that the estate or interests sought to be protected cannot be made out.

36 Accordingly, if a caveator is able to demonstrate a reasonably arguable case as to the existence of a caveatable interest, the ordinary course is for the caveat to remain and for the disputed questions of fact to be left for trial by writ of summons with pleadings. However, it must appear from the evidence on the originating summons that the caveator might ultimately succeed in establishing his caveatable interest.

37 The Court also has power in appropriate circumstances to order removal of a caveat, but at the same time impose an injunction maintaining the status quo between the parties until their dispute can be resolved (Lydon v Ryding & Anor [2002] WASC 308). This might be the appropriate course where there is an arguable case as to the interest claimed but that interest is not in reality of a proprietary kind (eg when it is a "mere equity").

38 It is well established that on the hearing of a summons under s 138 the onus is on the caveator to demonstrate that there is a valid caveatable interest or, more correctly, that there is a serious question to be tried on the issue: Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 at 48.

39 Owen J observed in the Custom Credit case at 50 that although the considerations relevant to an interim injunction are applicable to a caveat, they arise within a peculiar statutory context. The balance of convenience was a factor to be considered. However, his Honour was of the view that interlocutory removal of a caveat where an arguable case as to the existence of the caveatable interest has been demonstrated would be unusual.

40 I must now return to the circumstances of the present case.

41 The first defendant's affidavits were directed to facts and matters bearing upon the source of the funds used to effect the Bateman property transactions; that is, the initial acquisition by Mr Mavaddat and his wife (the first defendant) and the subsequent transfer of Mr Mavaddat's half share in the property to the first defendant.

42 In essence, the first defendant's position at the hearing before me was that the dispute between the parties concerning the Subiaco property came to an end some years ago. Mr Mavaddat had continued in business and as at August 2004 and in following months had access to funds which had nothing to do with his previous business relationship with the plaintiff. In these circumstances it was not open to the Court to infer that the Bateman property transactions were financed by funds misappropriated from the plaintiff some years ago.

43 Counsel for the first defendant contended, as he had contended in a letter dated 21 December 2006 to the plaintiff's solicitors prior to the hearing, that the plaintiff's statutory declaration in support of the caveat had advanced a case based essentially upon speculation that the funds used to acquire the Bateman property must have come from the plaintiff originally. However, there was no tangible evidence to support such a proposition and it was rebutted by the first defendant's affidavit evidence as to the actual source of the funds. This brings me to the first defendant's affidavits.

44 Mr Mavaddat said in his affidavit sworn 9 January 2007 that on or about 18 August 2004 the sum of $10,000 was paid as a deposit to Reliance Realty with respect to the purchase of the Bateman property by Mr Mavaddat and the first defendant as joint tenants. He exhibited to his affidavit a copy of ANZ cheque number 001592 dated 18 August 2004 drawn on the Key West Realty account and a receipt provided to him by Reliance Realty dated 23 August 2004. He exhibited to his affidavit also an ANZ Bank statement for the period in question directed to Mr M Mavaddat of Key West Realty showing that the business account had an overdraft limit of $380,000 and as at 19 August 2004 it was in debit in the sum of $323,023.93. The statement shows also that on 24 August 2004 a withdrawal was effected by cheque number 001592 in the sum of $10,000 with the result that the debit entry was increased to $333,023.93.

45 I note in passing that this part of the defendant's evidence was said to establish that the source of the initial deposit of $10,000 were funds advanced to Mr Mavaddat by his bank. This, it was said, rebutted any suggestion that the funds in question had come from the plaintiff or the former partnership.

46 Mr Mavaddat went on to say that the amount of $1,155,150 was funded by a first mortgage provided by HSBC Bank Australia Ltd. Exhibited to his affidavit was a copy of a settlement statement to this effect prepared by Shane Jacobs Settlements dated 22 December 2004 showing a total payable of $1,533,508.53 (inclusive of stamp duty and other costs and disbursements).

47 It was said further, as evidenced by correspondence concerning the matter, that certain selling fees referable to a development known as the "Glenfield Beach Estate at Geraldton", were payable to Mr Mavaddat. More particularly, Mr Mavaddat said that he authorised Shane Jacobs Settlements to pay the sums of $288,188.53 and $80,170 (for stamp duty) out of commission payable to Key West Realty as a result of the sale by Key West Realty of Glenfield Beach Estate at Geraldton. At the settlement in respect of the Bateman property in late December 2004 a total of $368,358 (being the said sums of $288,188.53 and $80,170) were paid to the vendor in accordance with the authorisation given to Shane Jacobs Settlements.

48 Mr Mavaddat said further that in or about April 2005 he agreed to sell his half share of the property to the first defendant for $725,000. Exhibited to his affidavit was a copy of the stamped transfer of land dated 15 April 2005 in which the consideration is described as $725,000.

49 Mr Mavaddat went on to say that in or about May 2005 and after receiving legal advice he instructed Christie Whitemore, licensed valuers and property consultants, to prepare a valuation of the property. The property was then valued at $1.4 million. On or about 20 May 2005 the first defendant paid the sum of $32,850 using cheque number 000174 drawn on her HSBC Bank account to the Office of State Revenue for stamp duty on the transaction.

50 He said further that $131,875 was paid to him by the first defendant on or about 24 May 2005 out of her HSBC Bank account as evidenced by a copy of the relevant bank statement which includes reference to the cheque in question being cheque number 000178. On or about 24 May 2005 he deposited the cheque in question into his BankWest account.

51 Mr Mavaddat said that the first defendant alone then resumed responsibility for the whole of the mortgage. Exhibited to his affidavit was a copy of certain passages of the mortgage document showing, in particular, that as at 7 December 2005 the mortgagor is described as "Fariba Mavaddat of 8 Bateman Road, Mt Pleasant, WA".

52 Mr Mavaddat said that at the relevant time the mortgage balance was in the order of $1,144,256 (as evidence by a copy of an HSCB statement exhibited to his affidavit). The balance of $20,997 (that is, $1,450,000 minus $1,144,256 divided by two less $131,875) remains a loan from himself to the first defendant being repayable by her to him on demand.

53 Mr Mavaddat said finally that no part of the Bateman property was purchased by funds belonging to Ark Securities Pty Ltd or the plaintiff. He observed that the events, the subject of the action between himself and the plaintiff, had occurred in 1999 to 2001, and with Ark Securities Pty Ltd being placed into liquidation on 15 June 2001.

54 The first defendant by her affidavit sworn 9 January 2007 confirmed the contents of her husband's affidavit to be true and correct. Exhibited to her affidavit was a statutory declaration purporting to provide information concerning her financial affairs and payments made by her referable to the transfer of her husband's half share in the Bateman property. These were essentially hearsay assertions and I was not inclined to give weight to them. By an affidavit sworn 9 January 2007 Shane Jacob provided information bearing upon the settlement of the purchase of the Bateman property in December 2004.

55 The plaintiff, by her counsel, submitted that the Court could not place reliance upon the affidavit evidence of Mr Mavaddat having regard to the adverse findings made against him by Roberts-Smith J concerning his credibility. I will not traverse all the passages in the 2005 judgment and matters touched upon by counsel in the course of making this submission. However, it is certainly true that in the course of the judgment his Honour said of Mr Mavaddat's case that there was a quite extraordinary amount of evidence of lies, deceit and dishonesty on Mr Mavaddat's part, going even to matters relating to the proceedings. His Honour observed at [260] that Mr Mavaddat agreed that in order to obtain necessary finance he was prepared to and did create false statements to mislead the bank. He said further at [265] that he was prepared to lie on oath to advance his case and that he was prepared to present false documents to the Court to bolster his lies. His Honour said also in his supplementary reasons at [23] that the case before him was one in which the evidence of the defendant (Mr Mavaddat) and his whole defence to the claim was a deliberate concoction.

56 It was against this background that counsel for the plaintiff submitted that no weight should be given to the assertions by Mr Mavaddat in the present proceedings and little or no weight should be given to the documents put up by Mr Mavaddat to support his word. This set the scene for the plaintiff's basic proposition that the factual matters in issue should not be resolved upon the basis of affidavit evidence. The disputed caveat should be extended pursuant to the conventional approach reflected in the decided cases that where there were contentious factual issues the caveat should be extended subject to the caveator (in this case the plaintiff) being required to commence legal proceedings to substantiate his claim.

57 At first blush, having regard to the complex and troubled history of the relationship between the parties, and the adverse findings made against Mr Mavaddat in the earlier proceedings, there appeared to be considerable force in the submissions made on behalf of the plaintiff. However, upon closer analysis, there was no getting away from the fact that the plaintiff's claim to have a caveatable estate or interest in the land by way of constructive trust depended essentially upon an inference being drawn by the Court that the plaintiff's money, or money drawn from the partnership, had been used to finance the deposit. The plaintiff could not identify any specific document or event which directly supported or corroborated his plea.

58 The plaintiff's case was essentially reflected in the assertion at par 15 of the plaintiff's affidavit: "Based on and because of the timing and the circumstances it is my belief that the source of the entire $290,000 deposit for the acquisition of the Bateman property was part of the aforesaid appropriated $487,000 and that no part of the deposit came from Mrs Mavaddat". Accordingly, even if one were inclined to give little or no weight to the affidavit evidence adduced on behalf of the first defendant, it becomes difficult to hold, on the evidence presently before the Court, that the plaintiff has a reasonably arguable case in favour of the constructive trust it contends for. The plaintiff's case is essentially speculative.

59 It is true that circumstantial evidence can be used to prove the occurrence of a particular event by using the available evidence to draw an inference that that particular event did in fact occur. However, a primary fact that is alleged can only be drawn from the established circumstantial evidence where, in civil cases, it more likely than not happened, that is, for example, where the circumstantial evidence provides a factual foundation for arriving at the conclusion. Inferences must be drawn from facts established by other evidence and alternative hypotheses must be excluded.

60 In the present case, I am not satisfied, on the balance of probabilities, that sufficient facts have been established which permit the desired inference to be drawn. The misappropriation complained of arose out of a transaction and related events that happened some years ago and there is evidence before me that since then Mr Mavaddat has been involved in other activities. It is therefore possible that the funds used to acquire the Bateman property were obtained from sources other than the plaintiff and the first defendant. Moreover, there is documentary evidence before me in the form of cheques and bank statements to that effect.

61 I am of the view, notwithstanding the plaintiff's submissions as to Mr Mavaddat's lack of credibility, that I cannot disregard the documentary evidence. It is sufficient to cast doubt on the factual matters contended for by the plaintiff, namely, that Mr Mavaddat and the first defendant did not have access to any funds other than funds obtained from the plaintiff. The presence of such a doubt prevents an inference being drawn that the plaintiff's funds were used to acquire the Bateman property. To my mind, this evidence is sufficient to rebut decisively a speculative case of the kind advanced by the plaintiff.

62 Accordingly, I am not satisfied that the plaintiff has made out a reasonably arguable case that it has a caveatable interest in the land by way of constructive trust of the kind contended for.

63 The plaintiff will be allowed leave to bring the application to extend. However, the application to extend the subject caveat is dismissed. I will hear from the parties as to whether any further orders or directions are required.

Butler v Fairclough

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (77 paragraphs)

LEE -v- MAVADDAT & ANOR [2007] WASC 18 (5 February 2007)

Parties

Legislation Cited (2)

Cases Cited (3)