Fitzgibbons v Shaftsbury Pty Ltd

Judgment 1HIS HONOUR: On 16 December 2010 the plaintiff James Fitzgibbons, lodged a caveat in respect of land of which the defendant Shaftsbury Pty Ltd, of which the plaintiff's mother Margo Fitzgibbon, is the sole shareholder and director, is the registered proprietor, claiming an interest described as an "equitable interest claimed by way of estoppel". This interest is said to arise by virtue of the facts that "in or about February 2003, Shaftsbury Pty Limited, through its director, represented that a portion of the property in question, being the house and land currently resided in by the caveator, belongs to the caveator." 2On 15 March 2011, the defendant served a lapsing notice in respect of the caveat. By summons filed on 30 March 2011, Mr Fitzgibbons claims, by way of final relief, a declaration that he has a proprietary interest in the property and, alternatively, that the defendant holds the whole or part of its interest in the property upon trust for him; and, by way of interlocutory relief, an order extending the operation of the caveat. 3On an application such as the present for the extension of the operation of a caveat on an interlocutory basis, the statutory test prescribed by (NSW) Real Property Act 1900, s74D(2), is whether the caveat has or may have substance. In practice, this approximates the test applied by the Court on applications for an interlocutory injunction as to whether there is a serious question to be tried for the final relief of the party. In addition, as on an application for interlocutory injunction, the Court takes into account the balance of convenience, although where a caveat is shown to have substance, the Court will not lightly jeopardise the validity and/or priority of the caveator's claim on balance of convenience considerations. 4As to whether this caveat has substance, it will suffice for present purposes if I summarise the principles relevant to claims to an interest in land arising by way of estoppel in equity by a reference to what I said in Vukic v Luca Grbin; Estate of Zvonko Grbin [2006] NSWSC 41 (at [27] - [28]), as follows: [27] Equity comes to the relief of a plaintiff who has acted to his or her detriment on the basis of a fundamental assumption in the adoption of which the defendant has played such a part that it would be unfair or unjust if he or she were left free to ignore it, on the footing that it would be unconscionable for the defendant to deny the assumption [ Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 675; Thompson v Palmer (1933) 49 CLR 507 at 547; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 404 (Mason CJ and Wilson J)]. It is essential to an equitable estoppel that the defendant knows or intends that the party who adopts it will act or abstain from acting in reliance on the assumption or expectation [ Crabb v Arun District Council [1976] Ch 179 at 188; Waltons v Maher , 423 (Brennan J)]. Such knowledge or intention may easily be inferred where the adoption of the assumption or expectation is induced by the making of a promise, but may also be found where the defendant encourages a plaintiff to adhere to an assumption or expectation already formed, or acquiesces in an assumption or expectation when in conscience objection ought to be stated [ Waltons v Maher , 423 (Brennan J)]. The unconscionability which attracts the intervention of equity is the defendant's failure, having induced or acquiesced in the adoption of the assumption or expectation with knowledge that it would be relied on, to fulfil the assumption or expectation or otherwise avoid the detriment which that failure would occasion [ Waltons v Maher , 423 (Brennan J)]. [28] Although numerous attempts have been made to identify the various components of equitable estoppel, for present purposes, the matters which a plaintiff must establish to found an equitable estoppel may conveniently be summarised, in the present context, as follows: First, in relation to the plaintiff's conduct: that the plaintiff acted (or abstained from acting) in reliance upon an assumption or expectation that a particular legal relationship existed or would exist between the plaintiff and the defendant, or that the plaintiff had or would acquire some interest in the defendant's property; Secondly, in relation to the defendant's conduct: that the defendant induced the plaintiff to adopt the assumption or expectation and encouraged the reliant activities of the plaintiff, or at least failed to deny the assumption or expectation with knowledge that the plaintiff was relying on it to the plaintiff's potential detriment and that it could be fulfilled only by transfer of the defendant's property, a diminution of the defendant's rights or an increase in the defendant's obligations; Thirdly, in relation to the interest or property: that the assumption or expectation was one which the defendant could lawfully satisfy. [See generally, Waltons v Maher , 428-429 (Brennan J); Meagher, Gummow & Lehane, Equity: Doctrines & Remedies, (4th ed., 2002), [17-105]]. 5On the present application, the plaintiff's evidence was neither contradicted nor challenged, nor is it inherently incredible. I must therefore proceed on the basis that it is at least seriously arguable that the plaintiff's evidence may be accepted at trial. For present purposes the crucial parts of that evidence may be summarised as follows. 6In the first few months of 1998, there were a number of discussions between Mr Fitzgibbons and his mother, as a result of which he came to the view, as expressed in paragraph 67 of his affidavit, that so-called "one-third agreements" apparently entered into between himself, his mother and his brother had now become a "family four way split between David, Tony, my mother and I, with 20% to be provided to the programs." This represents a belief on Mr Fitzgibbons' part that he had, or would have, a one-quarter interest in the proceeds of the business after provision of 20% for programs. Mr Fitzgibbons believed that in connection with discussions and negotiations about the future of the business, his mother was acting in David's and his interests, "and that I would be receiving one quarter of the sale price of our businesses" [par 82]. In about July 2000, in the course of a telephone conversation, his mother told him that a deposit for the purchase of the businesses had been received, that she had found a property in Bundanoon, and that she was "utilising a proportion of your's and David's money to buy this property", to which Mr Fitzgibbons responded "That is okay for me right now, as long as I have a house and some money, I will be all right," [par 84]. 7In about early 2005, his mother said to him: For tax reasons, we will put it on the books that we pay you $100.00 a week and give you $350.00 cash in hand off the books to manage the farm. You will manage the farm and if you maintain it, you will get a greater percentage of the farm when I die. Furthermore I plan on retiring here soon and it would be good to have you around helping me. He replied: "That's fine by me, I plan to retire here too". 8In about mid-2005, after the Bundanoon property (the subject of these proceedings and known as 'Shaftsbury Farm') had been purchased, Mr Fitzgibbons visited his mother at the main house on the property. He asked when he was going to get the money to which he claimed to be entitled from the proceeds of the business. His mother said "It is in the trust, that is where it is going to stay. Your relationship with Belinda is not that certain, it is best it stays there so that you don't lose half of it to her." He replied "As long as there is a mutual understanding that I get to stay in the cottage and get the 200 acres around it, that is fine." She responded "That is the way it is organised, we agreed to this a long time ago." 9This evidence at least arguably supports the existence of an assumption or belief on the part of Mr Fitzgibbons that he had presently, or alternatively upon his mother's death would have, an interest in the Bundanoon property reflecting his claim to one-quarter of the proceeds of the business, which had apparently been applied to the purchase of the property, and corresponding to or converted into a beneficial entitlement to the cottage on the property and the 200 acres around it. 10In paragraphs 14 to 16 of his affidavit, Mr Fitzgibbons deposes to works done by him to the main home on the property (which is occupied by his mother), to the cottage (which he occupies with his daughter), and on the farm in the vicinity of the cottage. These paragraphs prove, at least to the extent requisite for the present application, the expenditure of money and labour on improving parts of the Bundanoon property, including the part that he occupies. Logically, it is inevitable that that expenditure took place after the property was acquired, and after he had moved onto it. 11It would be easy in those circumstances, particularly having regard to the extracts from paragraphs 84 and 102 of his affidavit set out above, to infer reliance on the assumption to which I have referred in laying out those moneys and labour on the property. Indeed, in this respect, inference is often preferable to sworn assertions of reliance. The dubious nature of sworn assertions that a person has acted in a particular way because of a representation or advice, or would not have acted in a particular way but for a representation or advice, is well known. Reliance is better established by way of inference from the surrounding matrix of facts than from such overt and self-serving assertions. Indeed, in proceedings to which the (NSW) Civil Liability Act 2002, applies, s 5D(3)(b) of that Act determines that such assertions by a plaintiff are not admissible. 12It is true that the expenditure of moneys and labour deposed to in the affidavit is not on a grand scale, but it nonetheless amounts to detrimental reliance sufficient to support an estoppel: there is no requirement that such detrimental reliance be comparable in quantum to the benefit claimed. 13If the only issue in the case were detrimental reliance on an assumption, and there were no other concurrent basis for the plaintiff's claim to an interest, the question as to whether vesting a beneficial interest in the plaintiff would be a disproportionate remedy for the detriment incurred might well arise and on a final hearing it still might. But in this case the potential for such an assignment is diminished by the associated claim of the plaintiff that in effect one-quarter of the purchase moneys was beneficially his. In those circumstances, a proprietary remedy may well not be disproportionate, even if the quantum of the detrimental reliance were very slight. 14The content of paragraphs 84, 102 and 103 of Mr Fitzgibbons' affidavit, summarised above, also demonstrate, at least for present purposes, a knowledge on the part of his mother, and thus the defendant, of his assumption; and encouragement, or at least knowledge without discouragement, of his reliance on it. 15Undoubtedly the facts are incomplete. Undoubtedly there is room for debate as to whether the plaintiff's assumption was that he had a beneficial interest in the property, or that he would acquire one upon his mother's death. The precise scope of what, if any, equitable remedy he would be entitled to remains to be worked out, and remains to be clarified by further evidence. In this type of situation, equity offers a considerable menu of available remedies. It might decree sub-division of the property to give the plaintiff, if his case is ultimately accepted, beneficially and legally, the cottage and the 200 acres surrounding it, to be worked out by agreement between the parties, or, failing agreement, by the Court, or a referee. It might vest in the plaintiff a proportional interest in the entirety of the property. It might find that the plaintiff is a beneficiary of a constructive trust in respect of a portion of the property. Or it might impose a charge over the whole of the property securing the plaintiff's interest, which might be the value of the improvements effected, or of the detriment incurred. But, however one looks at it, the evidence as it presently stands shows an arguable case that the plaintiff has an equitable interest of some kind in the subject land, arising by one or other of the courses that I have described. In many of these cases the same result in substance can be reached by way of equitable estoppel or constructive trust. 16The defendant argued that, in circumstances where the plaintiff claimed that the representation was that he would receive only part of the land, a caveat claiming an interest in respect of the whole of the land was too wide. As a starting point, I accept that a caveat that forbids dealing with the whole of a parcel of land, when the interest supporting the caveat could affect only portion of it, is too large [see Re Paul (1912) 19 WN (NSW) 114; Queensland Estate Pty limited v Co-Ownership Land Development Pty Ltd (1969) Qd R 150; Roclin Investments Pty Ltd v Makris (1974) 7 SASR 485]. However, these cases depend upon the position being that the interest claimed is an interest in only part of the land. In Re Henderson's Caveat (1998) 1 Qd R 632, to which Mr Harding of counsel for the defendant very properly drew the court's attention, the situation was explained by Macrossan CJ and Demack J in the Queensland Court of Appeal in the following terms (at 638): As to the issues raised in paragraph (5) we do not think that the caveat should be defeated on the basis that in claiming an interest in the whole of Portion 69 it is too wide. If the parties had agreed or evidence had been presented which at this stage established that the caveat should be amended to refer to a similar parcel of two acres precisely identified, that would be one thing, but the two acre area has not yet been subdivided nor does it have its boundaries exactly established by any decision of the Court on firm evidence agreed between the parties. The Court therefore should not hold that the caveat is too wide and attempt to order its restriction or amendment in some fashion. Until precision is established it seems correct to accept that at the caveat stage that the respondent has an equitable interest sufficiently applicable to all of Portion 69. 17Davies JA said, on the same topic (at 642), after referring to in Re Paul and other cases in this territory: With respect, I cannot agree with the reasoning in these cases. In cases such as the present, equitable relief would be available, either in the form of an injunction or a limited decree for specific performance, to ensure that the registered proprietor deals with the larger parcel of land only in a manner consistent with subdivisional approval being obtained for the excision of the claimed portion. Any such order for relief would be expressed to extend to the registered proprietor's dealings with the larger parcel. In this respect, I agree with the views expressed by Hodgson J in Locke (at 11,690-11691). See also Kuper at 427-432. In my opinion, therefore, equity recognises the respondent's interest as extending the whole of Portion 69 until subdivisional approval is obtained. Consequently I think the respondent has an equitable interest in the whole of Portion 69. 18In my opinion, these observations are precisely applicable to this case. Assuming that the plaintiff's interest may ultimately be defined as the cottage and the 200 acres surrounding it, it is not yet so defined: there is not as yet any proposed, let alone approved, sub-division; and remedies are available to the plaintiff in respect of the whole of the land, including, for example, an order that it be sub-divided to that effect, or an order imposing a charge over it, or a declaration that the plaintiff has a beneficial interest in it. Accordingly, in my view the caveat is not too wide. 19It was also argued for the defendant that the caveat was invalidated by a number of formal defects. The first was that the caveat fails to specify the residential address of the caveator, identifying only an address for service care of the caveator's solicitor. 20(NSW) Real Property Regulations 2008 require that a caveat specifies a residential address. Real Property Act, s 74L, provides as follows: If in any legal proceedings a question arises as to the validity of a caveat lodged under the provision of this Part, the court shall disregard any failure of a caveator to comply strictly with the requirements of this Part, and of any regulations made for the purpose of this Part, with respect to the form of the caveat. 21The failure to specify a residential address is, in my opinion, such a failure as is caught by section 74L, and the Court therefore is required to disregard that non-compliance for present purposes. 22The second, and more significant alleged formal defect, is that it is said that the part of the land in which an interest is claimed is not sufficiently identified, as required by regulation 8 and Schedule 4 of the Real Property Regulations . Even assuming that such a difficulty would not be overcome by section 74L, the relevant regulation and schedule simply do not apply in the present case. They apply solely where the interest claimed is in part only of the land. As I have explained above, the present caveat identifies, and claims an interest in, the whole of the subject land. Accordingly, there is no such difficulty as alleged in that respect. 23I have also considered the sufficiency of the description of the interest as an "equitable interest claimed by way of estoppel." As has been observed in a number of cases, descriptions of the interest claimed should ordinarily state whether it is an interest as owner, or co-owner, or as chargee. Such descriptions are an important part of the substance of a caveat. But as clause 10 of Schedule 3 to the Real Property Regulations provides, it is unnecessary to specify an interest as "equitable"; hence the use of that word in the present caveat adds nothing. 24In a sense, the caveat does not describe whether the interest claimed is, for example, as a chargee or as an owner. But it does describe the interest as one arising by way of estoppel, and it does specify that it arises from a representation as to ownership. Bearing in mind the flexibility of equitable remedies in this area, in my view, when the nature of the interest claimed is read with the facts from which it is said to arise, the nature of that interest is sufficiently discernible that the caveat adequately provides with the particulars required by Schedule 3 of the Real Property Regulations . 25Accordingly, in my view, the caveat may have substance. 26I turn then to considerations relevant to the balance of convenience. First, it was said that there was a proposed refinance of the property on foot, which might be jeopardised by the maintenance of the caveat. It is to be observed, in relation to the proposed refinance, that the existing financier states, that at first sight at least, a new mortgage and registration of any further dealing would not be required: its existing mortgage would presumably subsist to secure the refinance. 27Even if a new mortgage were required, and even if the re-finance were to be by a new financier, the consent of the caveator to a dealing affecting it could be sought and would presumably be given - so long as the dealing were not detrimental to the caveator's claim, in the sense that it did not encumber the land to an extent greater than the present encumbrance. If such consent were refused, the Court could be moved for an order for withdrawal of the caveat for the purpose of permitting a refinance, and at the plaintiff's risk as to costs. I appreciate that the plaintiff's impecuniosity makes that a somewhat hollow risk, but it seems to me that the jeopardy to a refinance posed by the existence of a caveat in the circumstances of the present case, must be a very slight one. 28Secondly, it is said that the subsistence of the caveat may inhibit negotiations in connection with the proposed resumption of easements by the defendant. In my view, considerations similar to those relevant to the refinance issue are applicable here also. A consent could be sought and if it were not given, the Court could be moved for an order for withdrawal of the caveat to permit such dealings to be registered if necessary. Neither of these matters are of such substance or importance as to provide sufficient reason for depriving or jeopardising the validity or priority of the plaintiff's claim. 29It is next said, and with considerable validity, that the plaintiff's undertaking as to damages is worthless. The evidence is that the plaintiff is impecunious. I accept that for practical purposes his undertaking as to damages is practically worthless. Insofar as it is suggested on his behalf that ultimately such an undertaking could be made out of the interest he claims in the proceedings, that is not really an answer at all, because it is in the event he does not succeed in the proceedings that the undertaking would be of relevance and, in those circumstances, he would apparently have no resources with which to satisfy it. 30In some circumstances, the worthlessness of an undertaking as to damages would be highly relevant on the balance of convenience. That is certainly so when there is an apparently significant risk of pecuniary damage arising from the interlocutory injunction or caveat. But in this case, there seems to me to be no significant risk of such damage on the evidence as it presently appears. There is no suggestion of any impending planned sale. If there were an imminent transaction to which the caveat posed a threat, whereby it might occasion damage, then it is open to the registered proprietor to apply to the Court to have the caveat withdrawn for the purposes of permitting such dealing to proceed, and in that event the absence of a worthwhile undertaking as to damages might well be a highly relevant factor in favour of permitting the transaction to proceed. But in the absence of any such imminent proposed dealing, it seems to me the worthlessness of the undertaking as to damages is but one aspect of the relevant considerations. 31Overall, in my view the balance of convenience does not favour the removal of the caveat and the associated jeopardisation of the validity and/or priority of the plaintiff's claim. 32Finally, the argument was advanced that the plaintiff was guilty of such delay as to disentitle him from interlocutory relief. There is no substance in this argument. That the plaintiff had an interest in the property was denied for the first time, if at all, in December 2010, and the plaintiff moved the Court in time before the lapsing notice expired. 33Accordingly, I am satisfied that the caveat ought to be extended. My orders are that: