Landlush P/L v Rutherford [2002] QSC 219

Michael Dwyer Solicitor for the applicant plaintiff

[1] WILSON J: The applicant plaintiff seeks an injunction restraining the respondent defendant from transferring, mortgaging or otherwise dealing with a residential house property situated at 24 Uplands Drive, Parkwood, and an order pursuant to s 129 of the Land Title Act 1994 giving it leave to lodge a second caveat against the land notwithstanding the lapse of an earlier caveat.

[2] The applicant sues as the trustee of the Landlush Trust No 2. The primary beneficiaries of that trust are Amy Jennifer Darvall and Anthony John Darvall, who are the children of John Roger Darvall ("Mr Darvall") and his former wife.

[3] In its statement of claim, the plaintiff alleged -

" 3. In about the month of April 1998, the Defendant acquired by sale and a conveyance a house property on land described as Lot 80 on RP 192391 in the County of Ward, Parish of Barrow Title Reference 16538087 situated at 24 Uplands Drive, Parkwood in the State of Queensland.

4. The Plaintiff paid for the purchase of the house and land.

(a) The purchase price pursuant to a Contract for Sale dated on or about 6 March 1998 was $255,000-00.

(c) The balance of purchase money of $204,000-00 was provided by RAMS who took a first Bill of Mortgage over the said property.

5. The Bill of Mortgage to RAMS referred to in the previous paragraph was discharged and the property was refinanced with Permanent Custodians Ltd in August 1999 for the sum of $300,000-00. This advance paid out the RAMS debt of $200,000-00 approximately and provided a further $100,000-00 to enable Kensea Pty Ltd to purchase a business that trades as Gold Valley Landscape Supplies for the sum of $100,000-00 plus stock.

6. Since the purchase of the property the Plaintiff has paid all mortgage payments to the mortgagee amounting to approximately $95,000-00.

7. Since the purchase of the said property the Plaintiff has paid the sum of $80,000-00 by way of improvements to the said property."

It went on to claim the following relief (inter alia) -

(a) a declaration that the Defendant holds the land and all improvements thereon on a resulting trust for the Plaintiff;

(b) an order that the Defendant transfer and convey the land and all improvements thereon to the Plaintiff.

[4] The circumstances in which the property was acquired are in dispute. Mr Darvall was no longer living with his wife. He was having financial difficulties, and was shortly to become bankrupt. He was living at Labrador, where the children came to stay with him every fortnight. The accommodation was too small and unsuitable. He said in an affidavit sworn on 2 May 2002 -

"I had struck up a relationship in 1997 with the Defendant when she came to work with me at the Paradise Lanes Bowling Centre at Labrador as a book keeper. I did not want my name or the name of any company associated with me, to appear on the public register and I therefore asked the Defendant if she would allow the Plaintiff in these proceedings to purchase the property in her name, on the basis that the Plaintiff made all payments in connection with the property. The Defendant readily agreed to this and notwithstanding the exposure to the Defendant under the mortgages over the property, all payments have been made by or on behalf of the Plaintiff with respect to this property."

[5] According to the respondent, Mr Darvall was "a friend and business associate". Between 1996 and about September 2001 she worked for a number of companies with which he was involved including Kensea Pty Ltd, Landlush Pty Ltd, Marmindie Holdings Pty Ltd and Inaminka Holdings Pty Ltd. She was a director of the applicant between August 1997 and August 1999, and its secretary between August 1997 and June 2001. She was a beneficiary of various trusts including the Landlush Nos 1, 3 and 4 Trusts. She has deposed to unsecured loans to and from the companies, and to distributions from some of the trusts of which the applicant was trustee. She has sworn that it was her decision to purchase the property and that Mr Darvall assisted her with support in making the decision. He was bankrupt between 20 April 1998 and 17 August 2001. She has sworn that the purchase moneys and stamp duty and registration fees were paid from moneys she borrowed from RAMS Home Loans (secured by mortgage over the property) and from moneys she borrowed from Landlush Pty Ltd "in its own right and not as trustee of the Landlush Trust No 2" (which were unsecured). She has denied any agreement with Mr Darvall, and with "Landlush Pty Ltd in its own right or as trustee of The Landlush Trust No 2" that the house was purchased and or held on trust for The Landlush Trust No 2 or the Darvall children. She said, in an affidavit sworn on 17 April 2002, that there was an agreement between the applicant and her to this effect:

"(a) Mr John Roger Darvall would occupy the house as a `tenant at will' provided;

(b) that Landlush Pty Ltd ACN 070 007 742 in its own right would pay rent for Mr Darvall residing at the premises being an amount equal to the repayments under the mortgage. A further term of the agreement was that Landlush Pty Ltd would pay the rent either to me or directly to the mortgagee.

(c) The house would also be used as an office or work place for the companies that I was a director or shareholder of or associated with, or for the [Landlush] Trusts."

[6] Landlush Pty Ltd paid money into the defendant's bank account, from which repayments to RAMS Home Loans and subsequently Permanent Custodians Ltd were made. According to Mr Darvall the moneys came from Landlush Trust No 4 (another trust for the benefit of his children), and payments were made in this way to avoid the defendant's becoming involved in the Family Court proceedings between him and his wife. According to the defendant the payments by Landlush Pty Ltd into her account were in accordance with the agreement set out in the preceding paragraph.

[7] It is readily apparent from this very brief summation of the evidence that there are fundamental conflicts of fact about the circumstances in which the property was acquired and about how the mortgage payments were met. There are factual issues about other issues such as improvements Mr Darvall claims the plaintiff has effected to the property, and the authenticity of some accounting records and the destruction of others. There are criminal charges pending against the defendant. These are disputes which cannot be resolved on an application such as this.

[8] On 11 October 2001 the plaintiff lodged a caveat over the property claiming to be the "beneficial owner under a constructive trust of an estate in fee simple". The grounds of the claim were expressed as follows -

"Pursuant to a constructive trust arising by operation of law from certain monetary and non monetary contributions made by the said Caveator towards the purchase price, towards the mortgage payments to RAMS and Permanent Custodians Limited ACN 001 426 384 and towards improving the said land made with the agreement and intent of the said Caveator and the said Caveatee that by so doing the Caveator was acquiring the whole estate or interest as owner in the said land. By reason of the agreement made between the Caveator and the Caveatee, the said land has remained in the registered proprietorship of the Caveatee as trustee for the Caveator."

The respondent (by her solicitors) promptly served a notice requiring the applicant to commence a proceeding to establish the title claimed. However, a proceeding was not instituted within 14 days of that notice as required by s 126(4)(a)(i) of the Land Title Act, and the caveat lapsed. This happened because the plaintiff had not put its solicitors in funds to commence a proceeding.

[9] The defendant wishes to sell the property. On three occasions she has given Mr Darvall notice to leave the property.

[10] The applicant submitted that there are serious questions to be tried whether the defendant holds the land on a resulting trust for it, or alternatively whether the defendant holds it subject to a constructive trust. Further, it was submitted, this is an appropriate case in which to grant leave to lodge a second caveat on the same grounds as the lapsed caveat.

[11] In its statement of claim the plaintiff claimed that the property is held on resulting trust, while a constructive trust was relied on to support the caveat.

[12] In Calverley v Green [1984] HCA 81; (1984) 155 CLR 242 at 246 - 247, Gibbs CJ said-

"Where a person purchases property in the name of another, or in the name of himself and another jointly, the question whether the other person, who provided none of the purchase money, acquires a beneficial interest in the property depends on the intention of the purchaser. However, in such a case, unless there is such a relationship between the purchaser and the other person as gives rise to a presumption of advancement, i.e., a presumption that the purchaser intended to give the other a beneficial interest, it is presumed that the purchaser did not intend the other person to take beneficially. In the absence of evidence to rebut that presumption, there arises a resulting trust in favour of the purchaser. Similarly, if the purchase money is provided by two or more persons jointly, and the property is put into the name of one only, there is, in the absence of any such relationship, presumed to be a resulting trust in favour of the other or others. For the presumption to apply the money must have been provided by the purchaser in his character as such - not, for example, as a loan. Consistently with these principles it has been held that if two persons have contributed the purchase money in unequal shares, and the property is purchased in their joint names, there is, again in the absence of a relationship that gives rise to a presumption of advancement, a presumption that the property is held by the purchasers in trust for themselves as tenants in common in the proportions in which they contributed the purchase money: Robinson v. Preston [1858] EngR 426; (1858) 4 K & J 505, at p 510 [1858] EngR 426; (70 ER 211, at p 213); Ingram v. Ingram [1941] VicLawRp 20; (1941) VLR 95 and (1976)

EGD 730 (a decision of the English Court of Appeal)."

The presumption of advancement does not apply to a de facto relationship.

[13] The material time for determining whether a property is held on a resulting trust is the time of its acquisition. I have already referred to the fundamental conflict in the evidence as to the circumstances in which the property was acquired. The resolution of that conflict will turn largely on the respective credit of Mr Darvall and the defendant. Suffice it to say that there is a serious question to be tried whether the defendant holds the property on resulting trust for the plaintiff.

[14] A constructive trust may arise subsequently and override the beneficial interest or interests acquired at the time of purchase. The factual disputes about the making of the mortgage payments and improvements to the property can be resolved only by a trial. The defendant's counsel submitted that the plaintiff should not be allowed to rely on the constructive trust argument on this application because it had not been pleaded. However, as I intimated during the hearing, if the balance of convenience were in favour of granting an injunction, I would grant one on condition that an amended statement of claim be filed promptly.

[15] I turn then to the balance of convenience. The plaintiff sues as trustee of a trust, the beneficiaries of which are the Darvall children. They do not live on the property. By its director Ian Bruce Charles, it proffered the usual undertaking as to damages. In his affidavit Mr Charles went some way to addressing the worth of that undertaking. Apart from the property in question, the only asset of the trust seems to be its shareholding in Kensea Pty Ltd, which owns Golden Valley Landscape Supplies, a business conducted at Andrews on the Gold Coast. According to Mr Charles, the net value of that business after payment of all debts is in excess of $200,000-00. The caveat lapsed because the plaintiff's solicitor was not put in funds to commence a proceeding to enforce the interest claimed. The mortgage payments were all up to date at the time of the hearing, although they had previously fallen behind. Counsel for the defendant fairly pointed to the absence of evidence from an officer of the plaintiff company that it has the will and the capacity to keep up the payments. Mr Darvall continues to live on the property. He was recently discharged from bankruptcy. The defendant wishes to sell the property, and claims that she will suffer financial hardship if she is unable to do so.

[16] In all the circumstances, I am not persuaded that the balance of convenience favours the grant of an injunction to restrain the sale of the property. Damages would be an adequate remedy for the plaintiff. However, I think that the net proceeds of any sale should be paid into Court or a trust fund mutually acceptable to the parties pending trial or earlier resolution of the matters in issue.

[17] Section 129 of the Land Title Act provides -

129. If a caveat lapses or is withdrawn, cancelled or removed for a lot, or is rejected by the registrar under section 157, the person who was the caveator may lodge another caveat for the lot on the same, or substantially the same, grounds only with the leave of a court of competent jurisdiction."

[18] The Court has discretion whether to grant leave to lodge a second caveat on the same grounds as a lapsed caveat. The principles on which the Court will order a current caveat to be removed are a relevant consideration. It is well established that a current caveat should be removed unless the caveator shows that there is a serious question to be tried which would justify leaving it undisturbed (Re McKean's Caveat [1988] 1 QdR 524) and the balance of convenience favours the maintenance of the status quo. A fortiori, where leave is sought to lodge a second caveat on the same grounds as one that has lapsed, the applicant should at least satisfy those criteria. The Court should consider also whether there is a satisfactory explanation for the lapse of the first caveat, whether there is a satisfactory explanation for any delay in making the application for leave, and whether the respondent would be unduly prejudiced by the lodging of a second caveat.

[19] As I have sought to explain above, I am satisfied that there are serious questions to be tried about the beneficial title to this property, but I am not satisfied that the balance of convenience favours a total restraint on dealings with it. The applicant's explanation for the lapse of the first caveat (that it did not put its solicitors in funds to commence a proceeding) is a reflection of its financial position, itself one of the factors weighing heavily against the applicant on the argument about where the balance of convenience lies. The first caveat lapsed in early November 2001, but this application was not filed until mid April 2002; there is no explanation offered for the delay other than lack of funds. There is no evidence to support any prejudice to the respondent in addition to that I have already taken into account in considering the balance of convenience issue generally.

[20] In the circumstances, I refuse to grant leave to lodge a second caveat.

[21] In summary, the applications for an interlocutory injunction and for leave to lodge a second caveat should be dismissed. If the property is sold, the net proceeds of sale should be paid into Court or a trust fund pending trial. I see no reason why costs should not follow the event.

[22] I shall ask counsel to try to agree on the terms of a draft order. It should include liberty to apply.