Handberg v Walter & Registrar of Titles [2001] VSC 177

5. The title discloses that the registered proprietors of the land are Fritz Josef Walter and his wife, Ingrid Adelheid Walter. It discloses, too, that Mr and Mrs Walter mortgaged the land to the National Australia Bank by instrument of mortgage dated 3 September 1997 and registered in dealing No. V009853A on 29 September 1997. The mortgage was an all moneys mortgage granted to secure certain facilities with which I am not presently concerned.

8. The evidence shows that about twelve months later, in December 1998, the bank granted financial accommodation to Mr and Mrs Walter as trustees for the Walter Family Trust. This comprised a fixed rate interest only loan of $1 million for a term of one year, offered by letter of offer of 16 December 1998, and a business accommodation loan of $380,000 for a term of seven years, likewise offered by a letter of offer of 16 December 1998. The Walter Family Trust is a trust established by Deed of Trust dated 1 March 1996, and it is in evidence.

11. The fixed rate interest only loan was extended from time to time until it expired towards the end of 2000. The amount due was not repaid. This meant that Mr and Mrs Walter fell into default under both facilities and notices of demand were given on 24 November 2000.

14. On 21 December 2000 the bank appointed Mr Handberg to be its receiver and manager to realise the security. The amount of the total debt for the two facilities, as at 28 February 2001, was $1,333,554.62. Mr Handberg has entered into possession, and on 2 March 2001 he sold the land at auction for $1,030,000. Settlement of the contract of sale is due next Thursday, 31 May 2001.

17. The caveat with which I am concerned was lodged on the title on 29 March 2001 on behalf of the first-named defendant, Roland Walter, who is resident in Germany. He is a son of Mr and Mrs Walter. The interest which he asserts is described in the caveat as follows:

"The registered proprietor holds the property upon trust for the Walter Family Trust and for the caveator pursuant to a constructive trust."

I take this to mean that he asserts two independent interests in the land: first as a beneficiary of the Walter Family Trust, contending that Mr and Mrs Walter hold the land as trustee of that trust; secondly, under a constructive trust which arises from contributions he made towards the purchase and development of the land.

22. The second-named defendant, the Registrar of Titles, by letter dated 25 May 2001, indicates that he will take no part in the proceeding and will abide the result. This is the normal procedure for the Registrar of Titles.

25. Mr Roland Walter is, as I have said, a resident of Germany. He has no legal practitioner acting for him. Accordingly, I permitted his sister, Carmen Walter, to speak for him, and this she did. I heard, too, from his father, Mr Fritz Walter.

28. It is important that I state at the outset what this proceeding is all about and what it is not about. Mr Roland Walter, as caveator, must satisfy me that there is a serious question to be tried that he has an interest of the kind asserted in the caveat. If he satisfies me of that matter, and, further, that there is a serious issue to be tried that such an interest prevails over the interest of the bank, then I may, subject to discretionary considerations, permit the caveat to remain, or remove it, as the case may be. The exercise of my discretion must be applied as the justice of the case requires and may be imposed subject to conditions. That is what the case is about, namely, the interest of Mr Roland Walter in the property.

31. There are a number of matters which this case is not about. I mention them only because they were matters pressed upon me on behalf of Mr Roland Walter. I am merely summarising here the arguments that were put. The first argument was that the rights of the caveator are affected by Freemasonry. A good deal was said about this, and it seemed that what was pressed was that there may be an expectation of bias if it were shown that parties to the litigation and persons involved in the court process were associated with the Order of Freemasons. Two things need to be said about that. There is not a shred of evidence of any association by anybody in that organisation. The second is that the evidence of the impact of any such association was never made entirely clear. The issue, as I repeat, is a straightforward one as to what interest Mr Roland Walter asserts in the land and whether that interest, relevantly speaking, prevails over the bank's interest.

34. The second non-issue is that relating to the suggestion that the Act of the British Parliament of 1854 under which the Colony of Victoria obtained self-government was or might be invalid. As to this, I express no views at all. But, even if it were demonstrated that the statute was in some way defective, it was never explained to my satisfaction how this affects this case. The statute under which the Court is presently asked to act is one of the Parliament of the State of Victoria, the State of Victoria being established under the Constitution of the Commonwealth.

37. The next issue which I put to one side as not being an issue which is of any substance in this case is the suggestion that the rights of the caveator are affected by Chapter 29 of Magna Carta. In the same breath, mention was made of the Bill of Rights and the Act of Settlement. As I understand, what was pressed on behalf of Mr Roland Walter was that Magna Carta conferred upon him a right to trial by a jury. Accordingly, it would not be proper for this application to be determined either for or against him otherwise than by the verdict of a jury. As was pointed out, Magna Carta is an Act which is effective in the State of Victoria, but it provides that the right, if it includes a right to maintain a caveat, about which I have some doubt, is one which is to be exercised in accordance with the law of the land. The law of this land, the State of Victoria, provides, in terms of the Transfer of Land Act, that this application may be brought in the way that it is. Accordingly, there is no substance in that matter.

40. Next, I was told that the rights of Mr Roland Walter and of the bank were affected by various deficiencies in the circumstances in which the loan agreements were made, or in the documents which record these. Complaints were made about the dealings by the bank or by the receiver and manager with assets of the borrowers or of the company, Palatinat Brewery Pty Ltd, including the chattels.

43. I remind myself that the issue in this case is not concerned with those matters. The issue in this case is the interest of Mr Roland Walter in the land. Any complaints which he or his family or companies associated with them may have are presently the subject of other proceedings in this Court, No.4486 of 2001, in which the Walter Family Trust and others sue the bank. In that proceeding those plaintiffs sought interlocutory orders to prevent the bank from selling the land. This application was dismissed on 27 February of this year, and likewise in the Court of Appeal on 2 March. I understand this proceeding otherwise remains on foot.

46. The final matter that I wish to emphasise has nothing to do with this case is a suggestion which appeared in the material, that a member of the Federal Parliament who is a Freemason thereby owes allegiance to a foreign power and is by s.44 of the Commonwealth Constitution disqualified from that office. Again, assuming that a Member of Parliament was a member of the Order of Freemasons, a matter on which I express no view at all, it is difficult to see that it has anything to do with this case. No Act of the Federal Parliament is involved here.

49. Having put therefore to one side the matters which are not relevant to the case, I turn to the issues which are.

52. I have before me a number of affidavits filed on behalf of Mr Handberg. There is the affidavit of himself sworn on 21 May and an affidavit of Anne Marie Moon sworn the same day. I put to one side affidavits of service. On behalf of Mr Roland Walter, I received in this application a copy of an affidavit filed in proceeding No.5147 of 2001 sworn by Ms Carmen Walter on 21 May, and the exhibits to it. I received also a statement in the German language with a translation from Mr Walter senior.

55. On Thursday last I suggested to Ms Carmen Walter that if she wished to pursue the constructive trust point she might care to place before me some material showing what contributions her brother had made and the circumstances relied upon as giving rise to the trust which he asserts. The case was adjourned to today to enable her to attend to this. I have received and had regard to a further affidavit of hers which was delivered, unaffirmed, on 25 May and was filed in affirmed form today; a document entitled "Outline of Defence"; a document headed "8 Heads of Argument" and certain other documents which have been very helpful in enabling me to understand how the case is put.

58. I turn now to what seem to me to be the real issues in this case. The first issue is whether there is a serious question to be tried that Mr Roland Walter, as a beneficiary of the trust, has a present interest in the land sufficient to support a caveat. I was told that Mr and Mrs Walter senior held the land as trustees for the family trust. Let it be assumed that this is correct. The Trust Deed, which is in evidence, is a typical discretionary trust. Under its terms the trustees hold the trust property, including, I take it, the land, upon a trust to distribute income and capital as they see fit, when they see fit, among a number of specified beneficiaries and their families. Mr Roland Walter is one of these named beneficiaries. The interest that Mr Roland Walter, and indeed any of the beneficiaries, may have under that trust does not give him a caveatable interest. What he has is the hope that the trustees, if and when they decide to distribute the land as a trust asset pursuant to clause 5 of the Trust Deed, will, in their distribution, give him a share. This may be his expectation. It may well be the expectation of all the members of the Walter family. But as a matter of law it does not amount to a present interest in the land itself and will not, therefore, support a caveat. The first ground in the caveat, to my mind, is not made out, even to the point of showing only that there is a serious issue to be tried about it.

61. The second ground is that there has arisen a constructive trust by reason of contributions made by Mr Roland Walter to the brewery venture. The affidavit which was filed this morning in affirmed form asserts that Mr Roland Walter made a financial contribution of $A430,000 in November 1997. The evidence in support of that is rather frail. The transmittal showing the transfer of the funds shows that the transmittor in Germany is Mr Fritz Walter, whom I take to be the father. The financial accounts of the trust do not show Mr Roland Walter as a creditor. They rather suggest that the relevant creditor may be Mr and Mrs Walter senior, who are creditors of the trust in the sum of $1.65 million.

64. Let it be supposed, contrary to the evidence, that there is an issue to be tried that it was Mr Roland Walter who contributed this $430,000 to the venture. The second question that needs to be established in order to establish the constructive trust is that this payment was made in circumstances where the parties all agreed or intended that it should create a trust. There is no evidence of that at all. The highest the evidence goes is to suggest that the money was paid.

67. The next difficulty raised by counsel on behalf of the plaintiff - and it seems to me to be an insuperable one - is that at the time this payment was made, namely, November 1997, the mortgage was already in place. The consequence is that if an equitable interest was created in November 1997, then that interest must be subordinate to the interest which was created a few months previously in favour of the bank.

70. The second ground of claim in the caveat is likewise not made out, I am not satisfied that on the material before me there is a serious issue to be tried as to the existence of a constructive trust; and, furthermore, I am not satisfied that there is a serious issue to be tried that such a trust, if it does exist, takes priority over the interest of the bank. Accordingly, the bank's transaction, the sale by auction, must proceed. The interest of Mr Roland Walter, if he has an interest, must abide the bank's prior interest.

73. It follows from all of this that the first-named defendant has not discharged the burden which lies on him, and that, accordingly, the application of the plaintiff must be allowed.

76. (Discussion ensued regarding the terms of the order and regarding costs.)

79. I will in the circumstances of this case make an order that the plaintiff has his costs on a solicitor and client basis on the ground that this application, as it turned out, seems very little different from that which has failed previously before Beach J on 7 May 2001.