Plaintiff v Defendant

Supreme Court of Victoria|2008-09-25|Before: BEACH J

AGREEMENT - No intention to create legal relations - No estate of a life tenant in possession - Claimed interest as tenant in possession under s 42(2)(e) of the Transfer of Land Act 1958 - Real property - Section 42(2)(e) Transfer of Land Act 1958.

1 Sixty-three Euston Road, Hughesdale ("the property") is the matrimonial home of Mr and Mrs Calderone. They have lived there since approximately September 1991. During this period, a company controlled by Mr Calderone, Seventh Asteroid Pty Ltd, owned the property until it transferred the property to an unrelated company, Australvic Property Management Pty Ltd ("Australvic"), on 21 July 2006. Australvic held the property as trustee for the benefit of Seventh Asteroid pursuant to a declaration of trust.

2 By a mortgage dated 21 July 2006, Australvic mortgaged the property to Perpetual Trustees Victoria Limited (the defendant) as security for a loan of $960,000. Perpetual became registered as first mortgagee of the property on 18 August 2006. Australvic defaulted on the mortgage and the defendant obtained a judgment for possession of the property on 26 February 2007.

3 In this proceeding, Mrs Calderone seeks, inter alia, an order that Perpetual be permanently restrained from exercising any rights it may have as mortgagee to take possession of the property. Mrs Calderone puts her claim on the basis that she is a tenant in possession of the property and/or she has a life interest and is therefore protected by the operation of s 42(2)(e) of the Transfer of Land Act 1958.[1]

4 Alternative claims for relief in the nature of declarations are also sought by Mrs Calderone. The basis upon which the alternative orders are sought is identical to the basis upon which the injunction is sought. For the reasons given below, Mrs Calderone's claim must fail.

(a) Mrs Calderone met Mr Calderone in the early 1980s. They became friendly and, in early to mid 1985, began dating each other. By November 1985, they were talking about a long-term future together, including getting married and having children together. At a time that Mrs Calderone can no longer remember, Mr Calderone told her that he had put in an offer to buy the property and, shortly after, he told her that the owner had agreed to sell it to him.

(b) In or about early 1990, Mr Calderone said to Mrs Calderone that the property was going to be for the family they were going to have and they would be living in the property after it was renovated. She told him that was what she wanted.

(c) Mrs Calderone understood Mr Calderone to be a businessman and knew that he had a number of business interests. However, she never saw it as her role to ask him about his businesses or how things were going. Both of them agreed on what she described as a "relatively traditional Italian relationship where he looked after the finances and [she] would stay at home and look after the children".

(d) They became engaged in February 1990. At that time, Mrs Calderone wanted to be reassured that the property was going to be their home and that it would never be used in his businesses. Mrs Calderone recalls that Mr Calderone said to her that "it would be safe and that I need not worry about it, because the property will be used for living and raising our family". She told him that was fine and that was what she wanted, and they planned their wedding for 22 July 1990.

(e) Notwithstanding their agreement, Mrs Calderone "wanted to have something in writing about it" and asked Mr Calderone to put it in writing. She recalls that Mr Calderone wrote down something which she recalls reading at about the time of their wedding. However, Mrs Calderone cannot remember whether what she read was read by her very shortly after the wedding or in the period leading up to the wedding. She did not see Mr Calderone write the document she read. He showed it to her later.

(f) The document she read was the pencilled handwritten annotation on the back of the copy of Seventh Asteroid's Certificate of Incorporation. The annotation is headed "July 1990". Beneath the heading, the following appears:

"This confirms that you Antoinette being my wife and as this is our matrimonial home this house is yours to live in for the rest of your life".

The annotation is then signed "Your loving Rocky", beneath which Mr Calderone's signature appears.

6 Mr Calderone gave evidence that largely corroborated Mrs Calderone's evidence concerning the conversations they had about the property and the fact that he wrote the annotation on the back of a copy of Seventh Asteroid's Certificate of Incorporation. A central issue in this case is whether or not the handwritten annotation is genuine. Mr Calderone was cross-examined closely by senior counsel for Perpetual to the effect that the annotation was not made in 1990 but was made much later (April 2007) when the sheriff was threatening to take possession of the property.

7 A number of matters were put both in cross-examination and during the course of final submissions by Perpetual which were designed to show the improbability of the annotation having been made in 1990 as asserted by the Calderones. Those matters may be summarised as follows:

(a) First, it was said that it is a strange thing for a couple about to be married (involving a relationship based on love and trust) to make such a note and that to ask someone to commit a position in writing is usually the product of distrust.

(b) Secondly, it was said that if Mrs Calderone was so concerned about her position, then why did she not keep the piece of paper instead of it being kept by Mr Calderone in one of his files.

(c) Thirdly, the fact that the note was written in pencil and "inconspicuously on the back of another piece of paper".[2]

(d) Fourthly, if Mrs Calderone was so concerned about her position and Mr Calderone was seeking to allay her concerns, then why not put the property in Mrs Calderone's name or their names or make her a joint tenant with Seventh Asteroid or prepare a proper and effective (and registrable) document giving her a lease or life estate.

(e) Fifthly, an examination of the events leading up to 27 April 2007 is said to show a telling absence of any assertion of a tenancy. This point relates to the failure by Mr Calderone to have the note referred to in the caveat lodged on his instructions on behalf of Mrs Calderone on 29 January 2007 and the failure to refer to the note at any time thereafter until the sheriff was about to take possession on 27 April 2007. To put it in the words of counsel for Perpetual: "The note suddenly 'turns up' ... on the evening of 26 April, the day before the eviction".

(f) Sixthly, the facsimile line on a copy of the note that was exhibited to an affidavit of Mrs Calderone[3] is said to be suspicious. This suspicion is said to be heightened by Mr Calderone's evidence that he faxed the note from his friend, Mr Neicho's facsimile machine because he did not have a fax at home - whereas Mrs Calderone gave evidence that they did have a fax machine at home in April 2007.[4]

(g) Seventhly, neither discovery nor a subpoena to Seventh Asteroid produced any evidence that Seventh Asteroid acknowledged or was aware of (let alone authorised) a grant of a tenancy or any other interest in the property to Mrs Calderone.

(h) Eighthly, it is said that the available documentary evidence is inconsistent with Mrs Calderone's claim. For example, in 1996 and 1997, both Mr and Mrs Calderone signed mortgages over the property on behalf of Seventh Asteroid to National Mutual which contained express representations and warranties that the property was free of encumbrances of the kind now claimed by Mrs Calderone.

(i) Ninthly, the reliability of Mr Calderone's evidence was put in issue by reference to various documents he had signed, including affidavits sworn for different purposes in different proceedings. For example, in a proceeding that concerned 58 Euston Road,[5] Mr Calderone swore[6] that 58 Euston Road was a house with "sentimental value to my family" which "[m]y wife wants to make ... our family home". This assertion is contrary to Mrs Calderone's intentions as disclosed in this proceeding. Further, in that affidavit, Mr Calderone swore that he was authorised to make the affidavit by Mrs Calderone - a matter which Mrs Calderone denied in cross-examination.

8 Mrs Calderone gave her evidence in a forthright and convincing manner. She was prepared in cross-examination to make concessions and when given an opportunity to embellish her case she did not do so. I formed a favourable impression of Mrs Calderone and accept her as an honest witness who was at all times doing her best to give an honest account of the circumstances as she knew them to be. I find that the discussions and circumstances that she says occurred in 1990 occurred, broadly speaking, as she has described them. I accept that Mr Calderone wrote words on a piece of paper the substance of which is contained in Exhibit "A" as the handwritten annotation. I am less certain that the handwritten annotation is the document Mrs Calderone saw for the first time 18 years ago in 1990. However, Mr Calderone's evidence was more positive in this regard. He positively identified the handwritten annotation as the document he wrote in 1990 and which remained in a file from that time until April 2007.

9 I have some reservations about the evidence of Mr Calderone. His affidavit in respect of 58 Euston Road (referred to above) does him little credit. However, I do not think that the handwritten annotation is a document that only came into existence on or shortly prior to 26 April 2007. In the end, I see nothing improbable in the fact that the document was written in 1990 at a time when it was important to Mrs Calderone, but that during the ensuing 17 years of marriage, its existence faded from memory to a point where Mr Calderone did not recall its existence until April 2007, notwithstanding the need for a caveat to be lodged on 29 January 2007. Whilst the matters raised by Perpetual (to which I have referred in paragraph 7 above) are not without substance, they do not amount to a sufficient cause (either individually or collectively) to reject the evidence of Mr and Mrs Calderone that the document was written in 1990. I find that the document was written in 1990 and read by Mrs Calderone at or about the time of the marriage in July 1990.

10 Two further factual issues need to be resolved. First, at some points in her evidence, Mrs Calderone appeared to be asserting that the property was hers to live in to the exclusion of Mr Calderone. However, when the matter was raised with her, Mrs Calderone fairly conceded that, notwithstanding some of the language that might have been used in her affidavits,[7] the agreement as she understood it was that the property would be the matrimonial home of both of them.[8]

11 Secondly, whatever may have been the "agreement" between Mr and Mrs Calderone, an issue arises as to whether Seventh Asteroid (the former owner of the property) entered into any agreement with Mrs Calderone or confirmed subsequently any such agreement. The case as originally pleaded was that there was an agreement between Mr and Mrs Calderone in February 1990 which Mr Calderone, as a director of Seventh Asteroid, confirmed on behalf of Seventh Asteroid in July 1990. As subsequently pleaded, the February 1990 agreement was said to be made between Mrs Calderone and Mr Calderone as a director and shareholder and acting for and on behalf of Seventh Asteroid. That agreement was then said to be confirmed in July 1990 by the handwritten annotation being made on the back of the copy of Seventh Asteroid's Certificate of Incorporation by Mr Calderone as a director and shareholder and on behalf of Seventh Asteroid. Mrs Calderone gave no specific evidence on the point. This was perhaps understandably because, at all times, she thought that Mr Calderone owned the property. Indeed, Mrs Calderone had been told at about the time the property was purchased that the previous owner had agreed to sell it to Mr Calderone.

12 There is nothing in the books or records of Seventh Asteroid that confirms any agreement previously made between the Calderones or that discloses the existence of an agreement between Seventh Asteroid and Mrs Calderone or the existence of any interest Mrs Calderone had or has in the property. So far as Seventh Asteroid is concerned, the highest at which Mrs Calderone's case can be put is that the annotation was written on the back of a copy of Seventh Asteroid's Certificate of Incorporation and Mr Calderone appears to have treated Seventh Asteroid's assets as his own. Mr Calderone gave no evidence of ever acting on behalf of Seventh Asteroid so far as the agreement was concerned and gave no evidence of Seventh Asteroid confirming the agreement (either through his actions alone or otherwise[9]).

13 The question of whether Seventh Asteroid confirmed any relevant agreement between Mr and Mrs Calderone in 1990 was made more complex during final addresses. Whilst the language of the pleadings and the evidence was all in terms of an "agreement" between Mr and Mrs Calderone which was confirmed by Seventh Asteroid, in response to an argument that there was no intention to create legal relations between Mr and Mrs Calderone and thus there could be no agreement upon which Mrs Calderone's case could be built, counsel for Mrs Calderone contended that the interest given in the property to Mrs Calderone in 1990 was alternatively given by way of a gift. Whilst the purpose of this submission was obviously to deal with Perpetual's submission that there was no intention to create legal relations, the submission itself highlights the underlying difficulty in Mrs Calderone's case. It is clear from the evidence of Mr and Mrs Calderone that the assurances given by Mr Calderone in July 1990 were never meant to be taken as contractual promises or assurances upon which legal proceedings might be brought in respect of a breach thereof. As Mrs Calderone described it, "It wasn't a business deal".[10] Further, it was not a legal agreement to sue Mr Calderone on if he broke his promise.[11] Neither Mr nor Mrs Calderone regarded the discussions as giving rise to a tenancy in her favour.[12] I find that in the course of the discussions between Mr and Mrs Calderone in 1990 concerning the property there was no intention to create legal relations or to do anything which would give rise to legal consequences. Mr and Mrs Calderone did no more than discuss and concur in a proposal that the property be the matrimonial home and not part of Mr Calderone's business.[13]

14 As for the allegation that the handwritten annotation and underlying conversations constituted the gifting of an interest in the property to Mrs Calderone, all that needs to be said is that this does not accord with the evidence. Neither Mr Calderone nor Mrs Calderone gave any evidence that Mrs Calderone was being given any interest in the property in 1990. Properly understood, Mrs Calderone was seeking an assurance that the house that they were both very keen on would remain the matrimonial home and be outside Mr Calderone's business interests. Mr Calderone was prepared to give that assurance and to put that assurance in writing. To use his words[14] "The family home was never meant to be touched". This also explains the lack of any record of any interest granted to Mrs Calderone in the property in the records of Seventh Asteroid. Such a record was unnecessary because it was the common intention of Mr and Mrs Calderone to live in the property as their matrimonial home throughout their marriage and that the home would not be used for business purposes. In those circumstances and with Mr Calderone having effective control of Seventh Asteroid, it was not necessary in Mr Calderone's mind to have Seventh Asteroid "confirm" any agreement or arrangement he had with Mrs Calderone.

15 In advancing his case in relation to the involvement of Seventh Asteroid and the binding of it in respect of the 1990 conversations and the handwritten annotation, counsel for Mrs Calderone attempted to place reliance upon the doctrine of unanimous assent.[15] However, in my opinion the doctrine has no application in this case for the following reasons:

(a) First, there is no evidence that Mrs Calderone, a shareholder who held one of the two shares at the relevant time, assented in any decision as shareholder of Seventh Asteroid. Indeed, it is clear from her evidence that during 1990 she was not even aware of the fact that she was a director and shareholder of Seventh Asteroid.

(b) Secondly, there is no evidence that any decision made granting Mrs Calderone an interest in the property was either within power or for a proper purpose. No evidence was led that the disposal of an interest in the property to Mrs Calderone was one which was in the interests of Seventh Asteroid.

(c) Thirdly, unlike the unanimous assent cases, the present case was not one where there was an actual unanimous assent of all of the shareholders in a transaction being entered into by the company. The argument put as to unanimous assent was no more than an attempt to treat Mr Calderone (a 50% shareholder and a director) as the equivalent to the company. That is, an attempt to lift the corporate veil. In giving the assurances he gave, Mr Calderone cannot be treated as the equivalent to the members of Seventh Asteroid in a meeting.

(d) Fourthly, the fact that Mrs Calderone might have assented to Seventh Asteroid making a decision in her favour had she known that she was a shareholder at the time does not take the matter further because the doctrine of unanimous assent requires actual assent and not merely "potential assent".

16 The fact that Seventh Asteroid never confirmed the agreement entered into between Mr and Mrs Calderone in 1990 is made even clearer by the fact that it entered into the 1996 and 1997 mortgages with National Mutual which contained express representations and warranties that the land was free from any encumbrance of the kind now claimed by Mrs Calderone. Indeed, the fixed and floating debenture charge given by Seventh Asteroid to National Mutual dated 13 June 1997 also contains such an express representation and warranty.[16] Further, Seventh Asteroid's dealing with and transfer to Australvic also demonstrates that, so far as Seventh Asteroid was concerned, no interest in the property had been granted by it to Mrs Calderone.

Does s 42(2)(e) of the Transfer of Land Act protect Mrs Calderone?

17 Section 42 of the Transfer of Land Act provides as follows:

(1) Notwithstanding the existence in any other person of any estate or interest ... which but for this Act might be held to be paramount or to have priority, the registered proprietor of land shall, except in case of fraud, hold such land subject to such encumbrances as are recorded on the relevant folio of the Register but absolutely free from all other encumbrances whatsoever, except -

(a) the estate or interest of a proprietor claiming the same land under a prior folio of the Register;

(b) as regards any portion of the land that by wrong description of parcels or boundaries is included in the folio of the Register or instrument evidencing the title of such proprietor not being a purchaser for valuable consideration or deriving from or through such a purchaser.

(2) Notwithstanding anything in the foregoing the land which is included in any folio of the Register or registered instrument shall be subject to - ...

(e) the interest (but excluding any option to purchase) of a tenant in possession of the land;

18 Counsel for Mrs Calderone relied principally upon the decisions of Barba v Gas and Fuel Corporation,[17] Burke v Dawes[18] and the cases in that line of authority.[19] In Barba, Gibbs ACJ said:[20]

"In Burke v Dawes ([1938] HCA 6; (1938) 59 C.L.R. 1, at pp. 17-18 ), Dixon J discussed as follows the effect of an earlier Victorian statutory provision which corresponded to s 42(2)(e) :

In Victoria these words have received an interpretation and an application as a result of which any person in actual occupation of the land obtains as against any inconsistent registered dealing protection and priority for any equitable interest to which his occupation is incident, provided that at law his occupation is referrable to a tenancy of some sort, whether at will or for years. Thus, a purchaser under a contract of sale, who at law is in possession as tenant at will of the vendor, has been held protected in respect of his equitable ownership as purchaser (Robertson v Keith( (1870) 1 V.R. (E.) 11); Sandhurst Mutual Permanent Investment Building Society v Gissing ([1889] VicLawRp 63; (1889) 15 V.L.R. 329)), a lessee in respect of an option to purchase contained in his lease (McMahon v Swan([1924] VicLawRp 62; [1924] V.L.R. 397)) and a wife in respect of an equitable life interest claimed under an unsigned separation agreement made with her husband (Black v Poole( (1895) 16 A.L.T. 155)). a'Beckett J decided the last named case in deference to previous decisions and against his own opinion, which he stated to be that 'those words were intended to refer to a tenancy as ordinarily understood arising out of an agreement under which the person in possession was allowed to occupy in consideration of some kind of rent or service of which the proprietor was to have the benefit.' The cases are collected and criticised by the late Dr Donald Kerr in his work on the Australian Lands Titles (Torrens) System (1927), at pp 75 et seq. But the interpretation has stood for nearly seventy years, and it would, I think, be most undesirable now to undertake the re-examination of its correctness.

Similar views were expressed by Latham CJ and by Evatt J. McTiernan J agreed with the remarks of Dixon J. The fifth member of the Court, Starke J was perhaps not so definite in the expression of his opinion but he did not disagree with what the majority of the Court said on this point. This question should therefore be regarded as settled."

19 Whilst it is correct, as counsel for Mrs Calderone submits, to say that s 42(2)(e) should be interpreted widely so that any person in actual occupation of the property obtains as against any inconsistent registered dealing protection and priority for any equitable interest to which her occupation is incident, in order for Mrs Calderone to succeed at law, her occupation must be referable to a tenancy of some sort. It is common ground that Mrs Calderone is not claiming that a lease exists (at least not as commonly understood). The interest she claims is that of a life tenant in possession as protected under s 42(2)(e). For the reasons given above, I have already concluded that no interest or estate in the property was granted to Mrs Calderone in 1990 either by Mr Calderone or by Seventh Asteroid. All that occurred in 1990 was that Mrs Calderone sought an assurance from her husband that the property would be the matrimonial home and that he would not use it in his business. There was no intention that the assurances (and the written annotation) would constitute an agreement which could be enforced at the suit of Mrs Calderone and there was no intention to give her any interest in the property over and above that which she would have enjoyed as Mr Calderone's wife and the mother of his children. Further, the then owner of the property, Seventh Asteroid, did not grant Mrs Calderone any interest or estate in the property.

20 I should deal with one further argument put by counsel for Mrs Calderone. He submitted that the question of whether the written annotation constituted a contractual promise or a gift did not need to be resolved and that the question of whether the interest or estate of a life tenant in possession was given to Mrs Calderone by the handwritten annotation fell to be determined by construing the annotation. He further submitted that the words "is yours to live in for the rest of your life" told in favour of a life estate, rather than a mere personal right to reside on the property for life.

21 The construction of the written annotation is a question which turns on the words of the document read in the context of the circumstances. It has been held that a right to "reside" or "live" on land confers a personal right only, since it must be exercised in person.[21] On the other hand, it has been held that a right to "use and occupy" a property points to a life estate since "use" or "occupation" may not only be exercised by the person to whom it is conferred in person but also may be exercised through another.[22] The use of the words "to live in" in the annotation of itself suggests a mere personal right to reside on the property. The context in which the assurances were given by Mr Calderone and the mutual intention of the Calderones to use the property as a matrimonial home further confirms this construction. Whilst counsel for Mrs Calderone attempted to place reliance upon Black v Poole[23] as a case showing that the words "for life" can be held to grant a life estate, rather than a mere personal right to reside for life, the circumstances of that case were very different from the circumstances of the present case. In that case, what was given by the husband to his wife was given in consideration of her withdrawing certain legal proceedings which she had taken against him by reason of his desertion of her. Further, whilst the judgment records that the husband said that he would assign the relevant allotment to the wife for her life, the judgment does not record whether words like "to live in" or "to use" were used. Black v Poole does not add anything to the debate so far as the construction of the handwritten annotation in this case is concerned. If anything, Black v Poole does not assist Mrs Calderone because in the judgment it is recorded that the wife's possession "should be held to have been under the agreement which entitled her to hold for her life". An agreement which entitled the person seeking the protection of s 42(2)(e) to "hold" for life is little different from one that entitles a person to "use" for life. In the circumstances, I remain of the view that, properly construed, the handwritten annotation did not grant the interest or estate of a life tenant in possession.

22 It follows from what I have said above that the plaintiff's claim must be dismissed. The injunction granted by Williams J on 18 May 2007[24] must be dissolved. I will hear counsel on the precise form of the order and on the question of costs.

[1] In her pleadings and during the course of evidence, Mrs Calderone put her claim on an alternative basis that Perpetual's interest in the property was subject to a constructive trust in her favour. However, in final addresses, counsel for Mrs Calderone abandoned this argument.

[2] Paragraph 40 of "The Defendant's Case"

[4] T62.8 - This evidence was given in re-examination

[5] Supreme Court proceeding number 4876/00

[6] In an affidavit sworn 7 September 2000

[7] The bulk of Mrs Calderone's evidence-in-chief was given by affidavit

[9] A historical company extract for Seventh Asteroid that was tendered as part of defendant's Exhibit "1" discloses that Seventh Asteroid had three directors in 1990, Mr and Mrs Calderone and one John Stanley McLean

[12] See Mrs Calderone's evidence at T28.11 and Mr Calderone's evidence at T75.10

[13] See generally Balfour v Balfour [1919] 2 KB 571; Cohen v Cohen [1929] HCA 15; (1929) 42 CLR 91; and Pettitt v Pettitt [1969] UKHL 5; [1970] AC 777

[15] See generally Re Duomatic Limited [1969] 2 Ch 365; Brick and Pipe Industries Limited v Occidental Life Nominees Pty Ltd [1992] VicRp 68; [1992] 2 VR 279; Herrman v Simon (1990) 4 ASCR 81; Poliwka v Heven Holdings Pty Ltd (No. 2) (1992) 8 ACSR 747; and Swiss Screens (Australia) Pty Ltd v Burgess (1987) 11 ACLR 756

[19] Which include Skospels v Perpetual Trustees of Victoria Limited [2004] VSC 336; ASIC v Money for Living (Australia) Pty Ltd (No. 2) [2006] FCA 1285; (2006) 155 FCR 349; and Black v Poole (1895) 16 ALT 155

[21] See Re Keenan (1913) 30 WN (NSW) 214 at 215

[24] Williams J granted an interlocutory injunction restraining the defendant from exercising any rights it may have to take possession of the property until further order.

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