Plaintiff v Defendant

1 The plaintiff (Ms Lu) applies pursuant to order 53 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules) to recover possession of land situate at and known as 31 Gertz Avenue, Reservoir, Victoria (Gertz Ave Property).[1] Ms Lu is the sole registered proprietor of the Property. The defendant (Mr Yu) is in possession of, and lives in, the Gertz Ave Property.

2 Ms Lu is also registered as proprietor of one other property, Unit 712, 233 Collins Street, Melbourne, Victoria (Collins St Property).[2] Luou Pty Ltd, as trustee of the Luou Family Trust is registered as proprietor of a third property, 98 Doncaster Road, Balwyn North, Victoria (Balwyn Property).[3]

3 This is one of three proceedings between the parties:

(a) Proceeding S ECI 2018 02307 between Mr Yu as plaintiff and Ms Lu as defendant, commenced by generally indorsed writ on 19 November 2018 (Trust Proceeding);

(b) Proceeding S ECI 2019 01525 between Ms Lu as plaintiff and Mr Yu as defendant commenced by originating motion on 8 April 2019 (Caveat proceeding);

(c) This proceeding commenced by originating motion on 21 April 2019 (Possession proceeding).

4 It is not possible at this stage to give any definitive account of the history of the dealings between the parties. Mr Yu is yet to file a statement of claim in the Trust proceeding and the affidavits filed by both parties in the several proceedings give widely varying accounts of the dealings between them. It is, however, sufficient for the present application to give a brief summary.

5 In the Trust proceeding, the generally indorsed writ claims 'damages for breach of contract and/or constructive and/or resulting trust arising out of joint business ventures between the parties'. No final statement of claim has been filed, although there have been two attempts which were rejected after argument. Mr Yu has filed affidavits setting out a history of a personal relationship and business dealings between the parties in the Trust proceeding.[4] Ms Lu has made affidavits in this proceeding[5] and in the Trust proceeding.[6] As Mr Yu would have it, the parties were in a de facto marriage/relationship for many years and also ran several businesses together.

6 The allegation of a de facto relationship was rejected after a trial in the Family Court of Australia. The Family Court Judge found that Mr Yu had not discharged the onus of proof on the balance of probabilities that the parties were in a de facto relationship as defined by s 4AA of the Family Law Act 1975 (Cth).[7]

7 Mr Yu then lodged caveats over the three properties. Each caveat claimed a fee simple interest in the land as the beneficiary of an implied, resulting or constructive trust. Mr Yu lives at the Gertz Ave Property and claims to have done so for 17 years. Ms Lu's lawyers lodged applications under s 89A of the Transfer of Land Act 1958 (Vic) (TLA) for the removal of the caveats. Mr Yu commenced the Trust proceeding purportedly to substantiate his claims as a beneficiary of a constructive trust or trusts in respect of the properties.

8 There is, as I have said, no pleading of the claims to interests in the three properties as arising under any form of resulting or constructive trust. But the evidence given by Mr Yu in his affidavits in the Trust proceeding may give rise to a common intention constructive trust, at least in respect of the Gertz Ave Property, of the kind described in Muschinski v Dodds[8] and Baumgartner v Baumgartner[9] so as to restore to Mr Yu contributions which he has made to a joint venture which failed when the contributions were made by him in circumstances in which it was not intended that Ms Lu should enjoy them. In Muschinski v Dodds Deane J described the principle as follows:

...the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do: cf Atwood v Maude [1858] LR 3 Ch App 369 at pp 374-375 and per Jessel MR, Lyon v Tweddell (1881) 17 Ch D 529 at 531).[10]

9 The evidence given by Ms Lu shows that the Gertz Ave Property was purchased in her name in 2002. Mr Yu deposes that the contract was signed by them both and he contributed his funds to the deposit, but the transfer was to Ms Lu alone, giving rise to a resulting trust in Mr Yu's favour. The property has 5 bedrooms and has separate entrances for the ground and first floors. Between 2002 and about March 2010 Ms Lu lived at the property and rented out rooms to tenants. It was mortgaged to the Commonwealth Bank of Australia in 2009 to secure a loan and the repayments are $2,237 per month. In 2009, she caused the trustee of the Luou Family Trust, Luou Pty Ltd, to purchase the Balwyn Property. From 2010 Ms Lu lived at the Balwyn Property, but maintained a room at the Gertz Ave Property. Ms Lu says that from 2004 to 2007 she permitted Mr Yu to reside with his then wife at the Gertz Ave Property.

10 It would seem that Mr Yu was also living at the Gertz Ave Property in 2015 when disputes erupted between the parties leading to intervention orders being granted in favour of Mr Yu against Ms Lu under the Family Violence Protection Act 2008 (Vic) which prevented her returning to the Gertz Ave Property. Then proceedings were commenced in the Family Court by Mr Yu alleging the he and Ms Lu were in a de facto relationship, an application which failed after a lengthy trial.

11 Sometime in 2015, Mr Yu ejected Ms Lu's tenants who had been renting rooms in the Gertz Ave Property. Since March 2015, Mr Yu has been residing at the property and not paying rent. Whilst he resides there Ms Lu is unable to rent out any rooms to defray the mortgage payments due each month, and the other outgoings. She estimates she has lost $55,000 as a result. She gives evidence to support the proposition that these losses will not be able to be recovered from Mr Yu because of other unpaid debts. She therefore looks the property itself for recovery of these losses.

12 Ms Lu contends that unless Mr Yu has a possessory interest in the Gertz Ave Property he is a trespasser and liable to be ejected under the summary procedure prescribed by ord 53 of the Rules. If he had a licence it has been revoked. Ms Lu has asked Mr Yu to vacate the property,[11] and he declines to do so on the basis that he has an equitable interest in it.

13 Ms Lu contends that taking Mr Yu's claims at the highest, his entitlement is to a distribution of an equitable share of the Gertz Ave Property. He raises no claim to a possessory interest in that property in his draft statements of claim or in his affidavit. Even if he were to make good the interest claimed in the caveat lodged over the title to the Gertz Ave Property, that would not give him a right of occupancy or possession.

14 More particularly, Ms Lu contends that if she holds the Gertz Ave Property on trust for herself and Mr Yu, as beneficiaries (as is claimed by Mr Yu), then the following principles extracted from Octavo Investments Pty Ltd v Knight[12] apply:

(a) there are two classes of persons having a beneficial interest in the trust assets:[13]

(i) first, the cestuis que trustent (the beneficiaries); and

(ii) secondly, the trustee in respect of her right to be indemnified out of the trust assets against personal liabilities incurred as trustee of the trust;

(b) the interest of the trustee to be so indemnified will be preferred to the interests of the beneficiaries, so that the cestuis que trustent (the beneficiaries) are not entitled to call for a distribution of trust assets which are subject to a charge in favour of the trustee until the charge has been satisfied;[14]

(c) the Gertz Ave Property is an asset of the trust which was let to tenants to earn income with which to service the loan secured by the mortgage registered over the title to the property;

(d) if the trustee has incurred liabilities in the performance of the trust then she is entitled to be indemnified against those liabilities out of the trust property and that is a first charge on the property;[15]

(e) for that purpose the trustee is entitled to possession of the property as against the beneficiaries.[16]

(a) the power contained in order 53 is intended to apply only in clear cases where there is no question to try and is intended to enable a speedy resolution in favour of the proprietor of land where trespassers are keeping her out. In this case, Mr Yu has been living in the property for about 17 years and claims he is a co-owner of it with Ms Lu;

(b) the plaintiff has failed to comply with her obligations under r 53.04 of the Rules to adequately inform the court of the circumstances in which the land has been occupied without her licence or consent;

(c) the originating motion has not been personally served on Mr Yu as required by r 53.05(2) of the Rules.

16 Order 53 creates a special procedure for the summary recovery of land in certain restricted circumstances. The pre-requisites to the application of the Order are that the persons in occupation of the land are[17] -

(a) a person who entered into occupation without the plaintiff's licence or consent or that of any predecessor in title of the plaintiff; or

(b) persons who, having been a licensee or licensees, remained in occupation without the plaintiff's licence or consent or that of any predecessor in title of the plaintiff.

17 I have summarised the law applicable to the summary recovery of land in a number of earlier decisions and I will not repeat them, except insofar as necessary, in these reasons.[18] It is however appropriate to point out that the procedure is intended to enable a speedy resolution in favour of the proprietor of land of a dispute whereby 'trespassers' are keeping the proprietor out,[19] and is intended to apply only in clear cases where there is no issue to try.[20] However, the existence of a factual dispute does not deny the applicability of Order 53 where it is possible to resolve the dispute readily and fairly.[21] Where an issue does emerge, the judge has discretion whether simply to dismiss the proceeding, to determine the issue or cause the issue to be subsequently tried. This includes giving directions as to the further conduct of the proceeding or ordering the proceeding to continue as if begun by writ pursuant to r 4.07 of the Rules.[22] If the Court, in its discretion, decides to exercise the jurisdiction to resolve the issue, it should be undertaken with great care.[23]

18 The application for recovery of possession in this case is made in unusual circumstances. Ms Lu, by her submissions, proceeds on the assumption that Mr Yu has an equitable interest in the Gertz Ave Property arising under a resulting or constructive trust. But Ms Lu maintains that there are two reasons why this does not stand in the way of her recovering possession as registered proprietor.

19 First, it is said that Mr Yu does not claim a possessory interest in the property. The general indorsement, to the extent it gives notice of the 'nature of the claim and the cause thereof and the relief or remedy sought', as required by r 5.04 of the Rules, fails to specify a claim to any possessory interest and appears to claim an entitlement to a distribution of an equitable share of the Gertz Ave Property.

20 This ground must fail at least at this stage. The general endorsement does not comply with the Rules, as it fails to comply with r 5.04. But whilst the writ is extant, there is a claim of a kind which, by reference to Mr Yu's affidavit reveals a basis for a claim to a resulting or constructive trust in respect of the Gertz Ave property. That claim is inevitably one which could give rise to an order requiring Ms Lu to transfer to Mr Yu a registered interest in the land. That would prima facie entitle him to possession, albeit jointly or as tenant in common with Ms Lu.

21 Second, on the basis of an assumption that Ms Lu holds the legal title to the Gertz Ave Property on trust for herself and Mr Yu in shares as yet uncertain, but for the purposes of argument, presumptively as tenants in common in equal shares, then on the basis of the principles set out above (at [14]):

(a) Ms Lu, as putative trustee, has the right to possession of the property in order to exercise her right of indemnity against the trust asset for personal liabilities incurred as trustee of the trust;

(b) the interest as trustee to be so indemnified constitutes a first charge upon that property and is to be preferred to the interests of Mr Yu, as a beneficiary, and any person claiming through him. As Stirling LJ expressed the principle in Jennings v Mather:

A trustee has for his protection a right to have costs and expenses properly incurred by him in the administration of the trust paid out of the trust property, and the amount of such costs and expenses constitutes a first charge upon that property. A Court of Equity will not take trust property out of the hands of the trustee without seeing that such costs and expenses are reimbursed to him, and that he is relieved from personal liability in respect of them; and, when the legal title to trust property is vested in the trustee, he has a right to resort to that property, without the assistance of the Court, for the purpose of indemnity against liabilities properly incurred by him in the administration of the trust. [emphasis added][24]

(c) for the purpose of exercising her right to indemnity, Ms Lu as trustee is entitled to recover possession of the property.

22 This argument is compelling. It resolves a somewhat messy factual matrix into a clear case where there the only issue is resolved by some basic principles of trust law. It does not result in denying an interest in the property to Mr Yu, indeed it clearly proceeds on the assumption that he has an equitable interest arising under a resulting or constructive trust. His caveat will, for the present, remain. So too will the Trust proceeding, in which he claims an interest in the property, subject to Mr Lu formulating a satisfactory pleading and expeditiously prosecuting the claims he seeks to make. He will, however, have to give up possession to Ms Lu to enable her to exercise her right to indemnity. Any sale of the property will, in the current state of the proceedings, involve the net proceeds of sale being held in trust to abide the outcome, if any, of Mr Yu's claim to an equitable interest in the property.

23 In relation to Mr Yu's contention that the originating motion has not been personally served on Mr Yu, as required by r 53.05(2) of the Rules, the following is clear:

(a) the application was served on Mr Yu's solicitors;

(b) Mr Yu appeared, by Counsel, in response to the application, and so he must be taken to have waived any requirement that he be personally served;

(c) the affidavit of attempted service filed on behalf of Ms Lu, gives rise to a clear inference that Mr Yu was evading service.[25]

24 Counsel for Ms Lu contended in these circumstances that the Court should dispense, nunc pro tunc, with the requirement for personal service. It seems to me that this course is sensible. The alternative is for the Court to declare under r 6.11 of the Rules that the originating motion by which the application is made shall be taken to have been served on the day it came to the notice of Mr Yu's solicitors. It matters not which, as the purpose of personal service is in all cases to bring the application to the notice of the party concerned, and that has clearly been done.

25 In relation to the contention made on Mr Yu's behalf that there has not been sufficient compliance with r 53.04(b) of the Rules (the affidavit in support must set out the circumstances in which the land has been occupied without her licence or consent), I disagree. Ms Lu exhibited her lengthy affidavit filed in the Trust proceeding to her affidavit in support in this proceeding. That sets out sufficiently those circumstances. Further, Ms Lu's affidavit states, as required by r 53.04(c), that she does not know the name of any person occupying the land who is not a defendant, that is any person other than Mr Yu. That gives rise to another matter that needs to be done.

26 The material and argument supports recovery of possession against Mr Yu and there is no evidence that there is anyone else in possession or occupation of the Gertz Ave Property. By r 53.07 the judgment for possession is required to be in a particular prescribed form (Form 53A). That form does not name any person from whom possession is to be recovered. It merely provides that the plaintiff recover possession of the particular land. That enables a warrant of possession to the sheriff which will authorise him to eject any person found on the land.

(1) The originating motion and a copy of the affidavit and of any exhibit referred to therein shall be served-

(a) on each defendant, if any; and

(b) on any person occupying the land who is not a defendant.

(2) Service on a defendant shall be personal.

(3) Service on a person occupying the land who is not a defendant shall be effected-

(i) affixing a copy of the originating motion and a copy of the affidavit to some conspicuous part of the land; and

(ii) if practicable, leaving in the letter-box or other receptacle for mail on the land a copy of the originating motion and a copy of the affidavit enclosed in a sealed envelope addressed to "The Occupiers"; or

(b) in such other manner as the Court directs.

28 By affidavit of service of Yitong Wong made on 13 May 2019, a covering letter, originating motion and affidavit of Ms Lu (with exhibits) were express posted to the Gertz Ave Property and addressed to "The Occupiers". Strictly speaking, this does not comply with r 53.05. In these circumstances, it is not appropriate to make an order in the prescribed form unless service on any person occupying the land who is not a defendant is effected in the manner set out in r 53.05(3)(a) or (b). In this case, because it is not known whether there are any other persons in occupation, but having regard to the prior use of the property for letting to tenants, I am not prepared to make an order that would clear the Gertz Ave Property of all occupants unless service is effected by affixing a copy of the originating motion and a copy of the affidavit to some conspicuous part of the house on the land, like the front door.

29 I will therefore adjourn the further hearing of the application for possession to enable the service under r 53.05 to be completely effected. Upon proof of such service, and subject to the appearance on the adjourned date of some other person or persons who justify a right to possession as against the plaintiff, I will make orders for the recovery of possession in favour of the plaintiff.

[1] The land more particularly described in certificate of title volume 09002 folio 508.

[2] The land more particularly described in certificate of title volume 10523 folio 675.

[3] The land more particularly described in certificate of title volume 06156 folio 085.

[4] Affidavits of Xian Qing Yu made 14 March and 2 May 2019.

[5] Affidavit of Ou Lu made 9 January 2019.

[6] Affidavit of Ou Lu made 9 January 2019.

[7] Xin Yu v Ou Lu (Family Court of Australia, Thornton J, 1 October 2018, DCG 2474 of 2015); exhibit OL-7 to the affidavit of Ou Lu made 9 January 2019 in the Trust proceeding, being exhibit OL-B to the affidavit of Ms Lu made 19 April 2019 in the Possession proceeding (Ou Lu affidavit).

[8] [1985] HCA 78; (1985) 160 CLR 583.

[9] [1987] HCA 59; (1987) 164 CLR 137.

[10] [1985] HCA 78; (1985) 160 CLR 583, 620.

[11] Ou Lu affidavit made 19 April 2019, [5].

[12] [1979] HCA 61; (1979) 144 CLR 360 (Octavo). The other authorities cited below were not referred to in argument, but are referred to in Octavo and other authorities relevant to the argument.

[13] Octavo [1979] HCA 61; (1979) 144 CLR 360, 367.

[14] Vacuum Oil Co Pty Ltd v Wiltshire [1945] HCA 37; (1945) 72 CLR 319; Octavo [1979] HCA 61; (1979) 144 CLR 360, 367; Jennings v Mather [1901] 1 QB 108, 113-114; affirmed in the Court of Appeal in Jennings v Mather [1902] 1 KB 1, 6 (Stirling LJ).

[15] Jennings v Mather [1902] 1 KB 1, 6; Savage v Union Bank of Australia [1906] HCA 37; (1906) 3 CLR 1170, 1186-9, 1191-2, 1196; Commissioner of Australian Federal Police v Cornwell (1990) 98 ALR 677, 681-2; Octavo [1979] HCA 61; (1979) 144 CLR 360, 369-70; Hayman v Equity Trustees [2003] VSC 353; (2003) 8 VR 557, 566-568.

[16] Octavo [1979] HCA 61; (1979) 144 CLR 360, 369-70.

[17] See Pappas v Bowmark Pty Ltd [1998] VSCA 120, [13].

[18] Framlingham Aboriginal Trust v McGuiness and Chatfield [2014] VSC 241, [34]-[45]; upheld on appeal in Framlingham Aboriginal Trust v McGuiness and Chatfield [2014] VSC 354; Tajon Pty Ltd v Arvanitis [2017] VSC 130, [27]-[34].

[19] Pappas v Bowmark Pty Ltd [1998] VSCA 120, [13].

[20] Palazzo v Pullen (Supreme Court of Victoria, Brooking J, 24 July 1992, BC9200663).

[21] Pappas v Bowmark Pty Ltd [1998] VSCA 120, [13]; Melbourne Anglican Trust Corporation v Greentree (Supreme Court of Victoria, Vincent J, 29 May 1997); Tolhurst Druce & Emerson v Maryvell Investments Pty Ltd [2007] VSC 271, [193]-[195]; Byrne v Ritchie [2009] VSC 114, [17].

[22] Palazzo v Pullen (Supreme Court of Victoria, Brooking J, 24 July 1992, BC9200663).

[23] Melbourne Anglican Trust Corporation v Greentree (Supreme Court of Victoria, Vincent J, 29 May 1997); Max Moar & Quuenbridge Pty Ltd v Shazia Duman [2007] VSC 266, [2].

[24] Jennings v Mather [1902] 1 KB 1, 6. The reference to a 'Court of Equity will not take trust property out of the hands of the trustee', refers to the fact that in that case an execution creditor sought to displace the trustee's possession of goods. It does not affect the priority of the trustee's right of indemnity in this case.

[25] Affidavit Dennis John Domaille made on 10 May 2019.