Plaintiff/Defendant by Counterclaim v First Defendant/Plaintiff by Counterclaim

1 Sandra Cassar, the plaintiff, is the administrator of the estate of her late husband, Francis 'Frank' Cassar. Frank Cassar died in 2011 and, under probate granted of a forged will, estate assets were transferred into the name of Michael Cassar, the first defendant, initially in his capacity as executor but ultimately in his own right as the only beneficiary under that will. On 18 March 2022 the grant of probate was revoked.[1] There were no other wills and Sandra Cassar was appointed as the administrator of Frank's estate to administer it as an intestacy. I will hereafter use first names without meaning any disrespect.[2]

2 Under the intestacy, Sandra as the widow and each of their four children will inherit. Sandra, Michael and another of Michael's siblings, Teresa, it has been concluded,[3] were aware that the will was not genuine. Indeed, it has been found that, after Frank's death, at Michael's instigation and as a result of an assertion by him that the family would otherwise 'lose everything', Sandra and Teresa (Sandra's daughter and Michael's sister) prepared a will leaving everything to Michael, backdated it, forged the deceased Frank's signature, and had two family friends falsely attest that they had witnessed Frank sign the will. This was done in circumstances where, it has been concluded, Michael told them that he would manage the properties and assets that his father had owned and would in due course distribute funds fairly among the family members. There is no finding as to whether Michael and Teresa's other two siblings, Paul and Francis Jr, were involved in or aware of the making of the forged will. This case concerns whether the assets that Michael received under the forged will should now be returned to the estate.

3 Frank's estate included properties at 58, 62 and 64 Kerr Street in Fitzroy (the latter also known as 385-393 Fitzroy Street), at 55-57 Argyle Street in Fitzroy, and at 176 Barkly Street in North Fitzroy (save for 176 Barkly Street, 'the estate properties'). The estate also included the shares in Grandview Developments Pty Ltd. Grandview Developments Pty Ltd owned properties at 365 and 375-379 Fitzroy Street in Fitzroy ('the Grandview properties'). It seems that the management of these properties prior to Frank's death had been poor, in that the Australian Taxation Office asserted that considerable sums were owed by Frank at the time of his death. 176 Barkly Street has since been sold and the proceeds used, in part, towards the purchase by Michael of a property at 373 Fitzroy Street, Fitzroy.

4 Sandra, in her capacity as administrator of Frank's estate, has commenced this proceeding in which she seeks:

(a) Declarations that the transfers to Michael of the estate properties and the shares in Grandview Developments Pty Ltd are 'void from the beginning and set aside';

(b) Declarations that the property at 373 Fitzroy Street is property belonging to the estate, or alternatively is held on a constructive trust in part for the estate;

(c) Orders directed at obtaining the transfer of the estate properties and the shares in Grandview Developments Pty Ltd back into the name of the estate;

(d) An order that Michael account to the estate for rent or other proceeds he has received from estate assets; and

(e) Equitable compensation.

5 She also seeks to trace the proceeds of 176 Barkly Street into 373 Fitzroy Street and to have that property transferred to the estate.

6 Michael contends that his title is indefeasible. He emphasises that Sandra was aware that the will was not genuine and that it had been prepared after his father's death. He also contends, among other things, that the claim is out of time or that Sandra is precluded from maintaining the claim under the doctrine of laches. Michael has also counterclaimed: he alleges that Sandra induced him to obtain probate of the fraudulent will, that he contributed time, effort and money towards managing and improving the various properties, that Sandra and his siblings acquiesced in his doing so and induced him to expect that he would receive the benefit from his contributions and improvements or be compensated, and that Sandra is estopped from denying these matters.

7 The Court has ordered, by consent, that the question of whether the properties and shares should be transferred to Sandra as administrator be determined as a preliminary question, with the issues of compensation, an accounting by Michael, the counterclaim, and the extent (if any) to which the properties will be held on trust for Michael to be determined at a later date.

8 In June 2018, Grandview Developments Pty Ltd obtained a loan of $6,845,000 from the third defendant Sandhurst Trustees Ltd. Michael mortgaged his various properties (that is, the estate properties) and Grandview Developments Pty Ltd mortgaged its properties to secure that loan. There is no suggestion that this transaction was other than at arm's length. Sandhurst Trustees Ltd is formally in possession of the Grandview properties and the estate properties, and is endeavouring to sell them. Sandhurst Trustees Ltd has been added, with its consent, as a party and orders have been made requiring it to pay the net proceeds of any sales into Court. It has otherwise been excused from further appearance.

9 It is sensibly accepted by the estate that if the properties are to be transferred to the estate, the estate may hold them on a constructive trust for Michael to the extent that he improved the value of the properties by spending time or money on them more so than he has benefitted from owning them over the past several years such that the estate, even taking into account the effluxion of time, is more valuable now than it would otherwise have been. That is not something that I have to determine now.

C. Should the properties be transferred back to the estate?

C.1 Does the fraud exception to indefeasibility of title apply?

10 Section 42 of the Transfer of Land Act 1958 gives a registered proprietor of land indefeasible title,[4] 'except in case of fraud'. Michael contends that this fraud exception does not apply because the property transfers took place 'under the auspices of the grant of probate of the 2009 will', and that the grant of probate was 'in place at the time'. He points out that the revocation of the grant was not expressed to be retrospective, and that for the fraud exception to apply, the transfer itself had to be fraudulent.

11 I do not agree that the transfers themselves were not fraudulent in the relevant sense. The will was fraudulent and was fraud of the deliberate and dishonest kind. The grant of probate was obtained by fraud because it was for a will known to be fraudulent. It involved Michael falsely asserting to the Court that the will was genuine. The transfers were fraudulent because they were effected under the auspices of a grant known to have been obtained by fraud and were purporting to give effect to a will that was known to be fraudulent. Indeed, the transfers were the intended culmination of the fraudulent endeavour. Fraud existed at every level. This is a matter of common sense. The express exception to indefeasibility of title 'in case of fraud' applies. Accordingly, Michael, who was intimately involved in the fraudulent conduct, is not entitled to any protection associated with 'indefeasibility of title' under s 42(1) of the Transfer of Land Act 1958.

12 In my view, however, there is a more fundamental problem with Michael's submission. The principle of indefeasibility of title conferred in part by 42(1) of the Transfer of Land Act 1958 protects a registered proprietor against prior unregistered interests. But that protection is subject to exceptions. Some exceptions are referred to in the section itself (such as easements, rights of way and interests of tenants in possession). But also, being registered does not protect a proprietor against their personal obligations, as the principle of indefeasibility of title:

'...in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or equity, for such relief as a court acting in personam may grant'.[5]

13 The idea behind titles being indefeasible is 'to protect a transferee from defects in the title of the transferor, not to free [the transferee] from interests with which [they have] burdened [their] own title.'[6] The claim by the estate to have the assets returned, based as it is in fraud, if good, is a claim against Michael personally that ultimately attaches, like all equitable claims, to his conscience. Accordingly, the fact that he has become a registered proprietor of the properties is really beside the point when the allegation is that because he has acted dishonestly he is under a personal obligation to return the properties to the estate. The real question, then, is whether the estate has a good claim against Michael for the return of the assets transferred to him in accordance with the forged will. If it does, the fact that Michael is presently the registered proprietor will not protect him and the Court is able to direct the Registrar of Titles to make such amendments to the Register as are necessary.[7]

C.3 Does the estate have a good in personam claim?

14 Michael contends that he is able to retain the properties in his name because the fraud was not committed 'against' Sandra or his siblings and they were aware of the dishonesty. Answering this question requires consideration first of the scope of the powers of a court of equity, and then whether, if there is power, it should be exercised in the circumstances of this case.

C.3.1 Equity has the power to undo the transactions.

15 Equity will undo transfers that were procured by fraud if that is what is required as a matter of good conscience. Courts of equity have the power to order the delivery up and cancellation of forged instruments or documents void on the grounds of illegality so as prevent their being used for mischief.[8] They have the power to require the return of chattels owned by another where damages would not be an adequate remedy.[9] The estate would have been able, if it had acted in time, to obtain orders against Michael requiring him to deliver up or to destroy transfer documents putting the estate's assets into his name in accordance with the forged will before they were recorded on the Register or before, in the case of the shares, the company's records were altered.[10] Once the concern of indefeasibility is put to one side for the reasons set out above, it follows that the Court could now make orders directed at achieving the same result even though the properties have been registered in Michael's name. The Court could order, for example, for Michael to execute instruments by which the properties and shares are transferred back to the estate, or, to like effect but more simply, make orders that the relevant registers be amended.

C.3.2 Should the Court undo the transactions in the circumstances?

16 The real issue is whether the Court should make such orders in circumstances where Sandra and at least one of Michael's siblings were aware of and participated in the fraud. Those seeking equity's intervention should, in general, come with clean hands.[11] Even so, in my view the Court should grant relief notwithstanding Sandra's participation in the fraud for four reasons.

17 The first is that Sandra is seeking to have the properties returned to her in her capacity as administrator of her husband's estate, not in her personal capacity. The estate did not participate in the fraud - it was the estate that, strictly speaking, was defrauded. The issue should be determined by considering what the position would be if, say, State Trustees had been appointed as the administrator of Frank's estate. I repeat and emphasise that it is not established that all of Frank's children - who stand to inherit under the intestacy provisions in place at the time of death - participated in the fraud.

18 The second reason is that there is no absolute rule that a party must be refused relief if they have been involved themselves in a fraud and, in deciding whether to grant relief, issues of public interest must be considered. As Lord Eldon LC said in Vauxhall Bridge Co v Earl of Spencer:[12]

In the view I take of the case, it will not be an obstacle to the plaintiffs that they do not come with clean hands, for it is settled, that if a transaction be objectionable on grounds of public policy, the parties to it may be relieved; the relief not being given for their sake, but for the sake of the public.

19 Similarly, in Nelson v Nelson,[13] Deane and Gummow JJ cited with apparent approval the identification of a 'principle of equity' by Jacobs J in Money v Money (No 2).[14] In that case, Jacobs J said:

... even though a transaction be tainted with illegality on the ground that its performance is contrary to public policy, Equity will interfere if on the same grounds of public policy the transaction ought not to be allowed to stand. In these circumstances, a party will not be debarred from relief simply because he is particeps criminis.[15]

20 There is a broad public interest that deceased estates be administered according to law. As a matter of public policy, this estate should be administered as an intestacy, for that is what it is, and not pursuant to a forged will. In the language of Jacobs J, for so long as the properties remain instead in Michael's hands, 'the illegal purpose is furthered'.[16]

21 The third reason is that, on the facts found by Moore J when his Honour determined to revoke the grant of probate and to appoint Sandra as administrator (which the parties accept should govern my approach to this claim), Michael was the initiator of the fraudulent design: he caused Sandra to agree to it by falsely telling her that if a will were not created then the family would lose everything, he pressured his sister Teresa to forge their father's signature, and he told Sandra and the other participants that he would distribute the assets among the family in 'some fair way'.[17] Sandra is not so much seeking to derive advantage from her own wrong, but rather is seeking to undo the consequences of her own wrongful acquiescence in Micheal's wrong.[18]

22 The fourth reason is the most simple. Not only did Michael initiate the fraudulent design, but he did so with a view to advancing his own self-interest. He obtained control of all the assets and then resiled from his promise to distribute them by falsely denying that he ever made that promise. He also sought to have the witnesses to the forged will give false evidence. It would be contrary to good conscience to leave things as they presently lie, with Michael receiving the entire estate, and Sandra, as an elderly widow who was married to Frank for more than 30 years, and Micheal's siblings, all of whom were entitled under an intestacy, to receive nothing.

23 When these factors are considered separately, but even more so when considered together, Michael's conscience remains bound and the involvement of other family members in the design orchestrated by him does not relieve him from the obligation, in good conscience, to return the properties to the estate so that the estate may be administered in accordance with the true position; that is, an intestacy.

24 Accordingly, subject to the defences discussed below, this Court should make orders that have the effect of returning the properties and shares to the estate.

25 Frank died on 14 October 2011. The fraudulent will was created in November 2011. Probate was granted on 3 February 2012. The various properties were transferred to Michael (first in his capacity as executor and then in his personal capacity) in September 2012 and August 2014. The shares were transferred to Michael in June 2019. The application to revoke the grant of probate was commenced on 23 July 2019. It was heard in April - June 2021, and a decision was given on 18 March 2022. This proceeding was commenced on 11 November 2022.

26 Michael did not press a limitations defence in the event that the Court was satisfied that there was fraud, but he did submit that relief should not be granted because of the delays in the estate's bringing this action.

27 A party bringing a claim in equity should bring it promptly. If there is delay that gives rise to prejudice such that it would be unjust to give the remedy, the claim should not be allowed to proceed.[19] That situation has not arisen. The Court has made findings and declared that the will was a forgery and revoked the grant of probate. The claim for consequential relief was brought promptly after those findings were made. The argument for relief is essentially a legal, rather than a factual, argument and it is not suggested that any evidence has been lost or is unavailable. There is nothing unfair in hearing this claim: in all the circumstances, 'the traditional notions of equity and good conscience' do not 'require that the plaintiff should be refused relief.'[20]

28 Sandra also submitted that Michael took the various properties as a volunteer and this is another reason, along with fraud, for which his title as registered proprietor is not indefeasible. In light of my earlier findings, it is not necessary for me to consider this argument. But also, it seems to me that this argument is a little beside the point. I accept that Michael, as a transferee of property for no consideration under a will, took as a volunteer, but the issue as to the extent to which a volunteer obtains an indefeasible title really arises only in circumstances where that person would have an indefeasible title that would protect them against a prior unregistered interest if they were not a volunteer. Sandra's cause of action to recover the properties is based in fraud, and she equally relies on the fraud exception to indefeasibility. If Michael were able to defeat the fraud exception to indefeasibility because of Sandra's involvement in the fraudulent design, then he would equally be able to defeat her underlying cause of action, and so the issue of whether his title was otherwise indefeasible would not arise.

29 The plaintiff is entitled to declaratory relief and to associated orders directed at returning the various properties and the shares into the name of the estate. I will hear the parties on the precise form of order and on the question of costs.

[1] See Re Cassar [2022] VSC 126 and Re Cassar (No 2) [2022] VSC 398.

[2] The second defendant, the Registrar of Titles, and the third defendant, the mortgagee in possession of the relevant properties as discussed below, did not participate in the proceeding and agreed to be bound by my decision.

[3] Re Cassar [2022] VSC 126 at [262], [295]-[306] (Moore J); see also Re Cassar (No 2) [2022] VSC 398 at [3], [11] (Moore J).

[4] Although the word 'indefeasible' is not in fact used in the legislation, it is a useful term to describe a system of title by registration where a registered interest in land has priority over unregistered interests. The Transfer of Land Act 1958 (Vic) creates such a system, subject to exceptions, by s 42, which provides, in broad terms and again subject to exceptions, that a registered proprietor holds land subject only to registered encumbrances, and s 43 that provides, again in broad terms and subject to exceptions, that a person contracting with a registered proprietor is not required to look beyond the register and is not affected by notice of any unregistered interest. See generally the observations of Lord Wilberforce in Frazer v Walker [1967] 1 AC 569, 580-1 (endorsed by the High Court in Breskvar v Wall (1971) 126 CLR 376).

[5] Frazer v Walker [1967] 1 AC 569, 585. The fact that the in personam exception is separate to the fraud exception is apparent from the statement by Wilson and Toohey JJ in Bahr v Nicolay (No 2) [1988] HCA 16; (1998) 164 CLR 604 at 629: 'Unless there was such fraud, the second respondents hold their title free of any interest the appellants have by reason of [a contractual right to repurchase], subject to any claim in personam that may lie against the second respondents.' See also 613 (Mason CJ and Dawson J), 637 (Wilson and Toohey JJ), 653-4 (Brennan J).

[6] Bahr v Nicolay (No 2) [1988] HCA 16; (1998) 164 CLR 604, 653 (Brennan J).

[7] Transfer of Land Act 1958 (Vic) s 103.

[8] See, eg, Money v Money (No 2) [1966] 1 NSWR 348 where the Court was considering, among other things, the effect of a decree declaring a transfer void and ordering the proprietor to re-transfer the land.

[9] Fells v Read (1796) 3 Vesey Junior 70; [1796] EngR 2346; 30 ER 899; see also Doulton Potteries Ltd v Bronotte [1971] 1 NSWLR 591.

[10] See, eg, Parker v Registrar-General [1976] 1 NSWLR 342.

[11] Deering v Earl of Winchelsea [1787] EngR 40; (1787) 126 ER 1276; 2 Bos. & P. 270, [271] (Lord Chief Baron Eyre).

[12] [1821] EngR 303; (1821) Jac 64 at 67; [1821] EngR 303; 37 ER 774, 775.

[13] (1995) 184 CLR 538, 563.

[14] [1966] 1 NSWR 348.

[17] Re Cassar [2022] VSC 126, [155] and [251] (Moore J).

[18] Cf Meyers v Casey [1913] HCA 50; (1913) 17 CLR 90, 124: 'No Court of equity will aid a man to derive advantage from his own wrong, and this is really the meaning of the maxim'. (Isaacs J).

[19] Finance & Guarantee Company Pty Ltd v Auswild [2019] VSC 664 (Riordan J) - see particularly [567] onwards.