Plaintiff v Defendants

1 This is an application pursuant to s 90(3) of the Transfer of Land Act (1958) for the removal of two caveats that have been lodged in respect of three Certificates of Title, Volume 6616 Folio 154, Volume 4628 Folio 552 and Volume 5428 Folio 443. The matter proceeded on the basis that should the applicants succeed in having the caveat removed from one of the properties, the same would follow for the other two. The applicants are the first and second defendants to the proceeding 9478 of 2005 and the respondent is the plaintiff. The essence of the plaintiff's claim is that he holds a beneficial interest in the properties as a unit-holder in two unit trusts of which the defendants are trustees. Mr Schmidt, as plaintiff to the substantive matter, and the respondent to this application, claims that the applicants were at all relevant times trustees holding the subject property on trust in favour of various unit-holders. The relevant properties are located at 28 Myola Street[1] and 10-12 Myola Street[2] Carrum.

2 The respondent claims that his dealings with Mr Ian Wynnton Maddocks, a former director of each of the defendant companies, have given rise to an equitable interest in the properties. The respondent further claims that 28 Myola Street Pty Ltd (the first defendant) was the trustee of Property Syndicate No 5 Unit Trust which consisted of the property 28 Myola Street . Carrum. He also claims that Myola Street Nominees Pty Ltd (the second defendant) was the trustee of Property Syndicate No 4 Unit Trust which comprised 10-12 Myola Street, Carrum. Mr Schmidt dealt only with Mr Maddocks who purported to act on behalf of the trustee companies. Mr Schmidt made several payments to Mr Maddocks in the belief that he was contributing to the purchase of the properties. Mr Maddocks has since been charged with at least four counts of theft from Mr Schmidt. In this context, Mr Schmidt lodged the caveats that he did. Mr Schmidt further claims that he holds an equitable interest in the properties and seeks the consequential declaratory relief.

3 On the other hand, the applicants deny any knowledge of Mr Schmidt and the alleged dealings with Mr Maddocks. Further, they claim that, to the extent of their knowledge, the Property Syndicate No 5 Unit Trust and the Property Syndicate No 4 Unit Trust do not exist. Rather, they say 28 Myola Street Pty Ltd holds 28 Myola Street as part of the 28 Myola Street Trust and Myola Street Nominees Pty Ltd holds 10-12 Myola Street as part of the Myola Street Trust.

4 The applicants claim that as soon they became aware, through their employee Franciscus Aloysius de Groot, of any wrongdoing by Maddocks they requested Maddocks resign as a director of the defendant companies. Although not denying the dealings between Maddocks and the respondent, the applicants deny that they were in receipt of any of the respondent's money.

5 The outcome of this application depends on two issues: first, whether the interest claimed by the respondent is able to support a caveat under s 89 of the Transfer of Land Act 1958 ('the Act'); and whether, in exercise of the discretion conferred by s 90(3) of the Act, I should allow the caveats to remain.

Whether the interest claimed by the respondent is able to support a caveat under s 89 of the Act

6 The applicants submitted that a unit-holder in a unit trust consisting of real property does not have an interest sufficient to support a caveat under the Act. Relevantly, there have been two divergent views on the type of interests sufficient to support a caveat: the view expressed by Batt J in Classic Heights Pty Ltd v Black Hole Enterprises Pty Ltd[3] and the view expressed by Harper J in Crampton v French.[4]

The Classic Heights View

7 Batt J in Classic Heights considered three possible situations in which a caveator may have an interest capable of supporting a caveat, namely: [5]

"(a) the caveator has an instrument which can be registered or recorded in the Register for the land the subject of the caveat and which, upon being recorded, will register an estate or interest in the land as claimed by the caveat;

(b) the caveator has a right arising from the transaction giving rise to the alleged caveatable interest to compel the registered proprietor to deliver an instrument as aforesaid; and

(c) the caveator otherwise has an estate or interest in land as claimed in the caveat."

8 With respect to (b) and (c), it is necessary to distinguish between two kinds of equitable interest in land. The first is an interest that is equitable but for it not being registered (equity presuming to be done what ought to be done). The second is an interest that is equitable by virtue of it being recognised by some equitable doctrine. Batt J held that (a) and (b) were sufficient to support a caveat, but that (c) was not.[6] In support of his decision, Batt J mainly relied on Miller v Minister of Mines and the Attorney General of New Zealand.[7] This case held that a licence granted pursuant to the Mining Act 1926 (NZ), which provided for its own system of registration, could not support a caveat under the equivalent New Zealand provisions. Batt J quoted the following extract: [8]

"The caveat procedure is an interim procedure designed to freeze the position until an opportunity has been given to a person claiming right under an unregistered instrument to regularise the position by registering the instrument. The procedure is inapt for the purpose of securing the registration of the mining licence."

9 However, Miller, on its facts, did not involve equitable interests. Rather, their Lordships were critical of the caveat procedure being used as a substitution for the alternative registration system laid down in the relevant mining legislation. Nonetheless, it is clear that their Lordships, referring to the view of Stout CJ in Staples & Co v Corby and District Land Registrar,[9] intended their reasons to stand for the proposition later set out by Batt J in Classic Heights.

The Crampton View

10 The view expressed by Batt J in Classic Heights was not followed by Harper J in Crampton. In that case, his Honour states:[10]

"In principle, one would think that interests which the law has long recognised as being interests in land should under the Torrens system receive protection comparable to that which they receive under the general law. There is no reason to believe that, in enacting the Transfer of Land Act, the legislature intended to abolish such interests. On the contrary, the community in general has as a commonplace occurrence continued to create equitable interests in land in the belief that, whether or not the execution of a registrable instrument might be compellable as a result, the system was not inimical to their continued interest. Yet if they cannot be the subject of a caveat (for, under a system of title by registration, there is no other means of protecting interests which cannot be registered) they are almost if not entirely defenceless against an incompatible but registrable interest; and this is so even if the latter interest is created, in breach of his lawful obligations, by the registered proprietor who granted the earlier, unregistrable, interest. Such a result would seem to me to be productive of injustice."

11 Harper J then cited Butler v Fairclough[11] which is often relied on as authority for the subsistence of equitable interests in land after the implementation of the Torrens legislation. Further, his Honour relied on Avco Financial Services Ltd v White[12] which was approved by Marks J in King v AGC (Advances) Ltd & Anor[13] to support the proposition that an unregistrable interest can support a caveat.[14] Batt J in Classic Heights treated these cases differently. With respect to Avco, Batt J noted that Gillard J in Avco overlooked the contentious point in Classic Heights; namely, whether an unregistrable interest can support a caveat.[15] Further, although King purports to approve the decision in Avco, the contentious equitable interest in King was not of the same nature as that in Avco. The interest in King being an unregistered interest as opposed to an unregistrable interest (as was the case in Avco), King should be qualified when considering Avco.[16]

12 Batt J and Harper J differ in their respective analyses with respect to Miller. Harper J states, "The real issue in [Miller] was whether [the relevant mining legislation] created rights which, although affecting land, existed quite outside the Torrens system and which did not therefore depend on registration... for their efficacy."[17] Further, Harper J states that, to the extent that Miller stands for the proposition that "rights which are incapable of giving rise to a registrable instrument may coexist with the Torrens system of title",[18] it supports his, not Batt J's, conclusion.

13 Ashley J in Chiodo v Murphy & Anor[19] also declined to follow Classic Heights. That case was primarily concerned with the interpretation of a particular contractual clause which is immaterial here. Ashley J also considered whether, should that particular clause give rise to an equitable interest, that equitable interest could in fact support a caveat. Expressly rejecting the approach in Miller, Ashley J noted that "the speech of Lord Guest in Miller presented an incomplete picture of the circumstances in which a caveatable interest may be established; and too narrowly stated the purpose of a caveat."[20] His Honour observed that the word "otherwise" in s.89(1) of the Transfer of Land Act should not be narrowly construed. Importantly, with respect to Avco and King, Ashley J adopted a similar view to that of Harper J in Crampton.

14 In George v Biztole Corporation Pty Ltd,[21] Smith J held that it is possible to assert a caveatable interest even if its existence requires determination by a court provided the interest will ultimately result in registration.[22] In Murphy v Wright,[23] the New South Wales Court of Appeal (Sheller JA dissenting) held that an option to attach security to a debt upon default created an equitable charge that was caveatable.[24]

15 The view expressed by Batt J in Classic Heights was rejected by Hodgson J in Composite Buyers Ltd v Soong who stated: [25]

"In my opinion, cases such as Murphy v Wright and

J & H Just (Holdings) Pty Ltd v Bank of New South Wales, as well as Bridge Wholesale and Troncone, support the view that any

equitable interest in land is sufficient to support a caveat, even if the caveator does not have a registrable instrument, and even if the caveator may not be entitled to an instrument which will lead to a recording in the register.

In my opinion, what is necessary is that there be an interest in respect of which equity will give specific relief against the land itself, whether this relief be by way of requiring the provision of a registrable instrument, or in some other way giving satisfaction of the interest claimed by the caveator out of land itself, for example by ordering the sale of the land and payment out of the proceeds of an amount in respect of which the caveator has a charge.

The view that the important requirement is that the interest be one in respect of which the Equity Court will give specific relief against the land is supported by the judgment of Mahoney JA in Troncone v Aliperti, where he goes to the extent of saying in a covenant by deed by the registered proprietor that until a loan be repaid he will not sell or deal with the land would, if the Court would enforce that covenant by injunction, give rise to a legal or equitable estate or interest in land within s 74F."

16 At the very least, this view brings interests of the nature of (c), as expressed by Batt J in Classic Heights, within the purview of the caveat provisions.

17 Commentators have described the judgment in Classic Heights as the narrow view and that in Crampton as the broad view.[26] A potential difficulty that arises for the proponents of the broad view is that the Appeal Division of this Court in Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd[27] held the right of a mortgagor to set aside for breach of a mortgagee's duty was an equity and not an equitable interest in land and therefore not caveatable. Swanston was based on Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liquidation).[28] However, it would appear on the facts of the two authorities that Latec is distinguishable on the ground that the subsequent purchaser had become registered by the time that the mortgagor sought to set the sale aside. For this reason, the judgment in Swanston has been criticised by commentators for inaccurately equating "characterisation for the purpose of resolving a priorities conflict with its characterisation for the purpose of determining caveatibility".[29] I do not consider Swanston is applicable to the present case because of different facts and circumstances. Swanston was essentially concerned with the duty of a mortgagee. It is also distinguishable because it is an authority very much concerned with priorities. Such an issue does not arise here. Further, the Appeal Division in Swanston was not called upon to consider the construction of s 89(1) in the context that arises here. In my view, the line of authority (aside from Classic Heights) applying the plain and ordinary meaning of the words in s 89(1) is to be preferred as the applicable line of authority in this case.

18 The answer to the issue in contention depends upon an interpretation of the relevant section (s 89(1)); specifically, the words "any estate or interest in land under any unregistered instrument or dealing or by devolution in law or otherwise". In light of the authorities expressed above, I take the view of Gillard J in Avco who stated: [30]

"Such is the generality of the language used in these two sections of the Act, it makes it difficult to support the view that a person claiming an equitable charge over land would not be entitled to lodge a caveat. Griffith, CJ said in Butler v Fairclough which was repeated by the Privy Council in Lapin v Abigail as follows:-- "It must be taken to be well settled that under the Australian system of registration of titles to land, the courts will recognise equitable estates and rights, except so far as they are precluded from doing so by a statute. This recognition is indeed the foundation of the scheme of caveats which enables such rights to be temporarily protected in anticipation of legal proceedings. In dealing with such equitable rights, the courts in general act upon the principles that are applicable to equitable interest in land which is not subject to the Act. In the case of a contract between two equitable claimants the first in time, all other things being equal, is entitled to priority ... a person who has an equitable charge upon the land may protect it by lodging a caveat which, in my opinion operates as notice to all the world, that the registered proprietor's title is subject to an equitable interest alleged in the caveat.

Despite the development of the notion of title by registration since the Privy Council decision in Frazer v Walker and the views expressed by Barwick, CJ, and Windeyer, J, in J. and H. Just (Holdings) Pty. Ltd. v Bank of New South Wales in relation to these dicta of Griffith, CJ, I am of opinion (sic) that those parts of the dicta where the learned Chief Justice has said that a party having an equitable charge could protect it by lodging a caveat on title have not been affected by any subsequent authority. It will be noticed that Griffith, CJ, pointed out that the recognition of equitable interests was always subject to their being precluded by statute. In my view, it has not been shown that in the circumstances of the present case there was any statutory provision which precluded reliance upon the well established equitable principles as to priority of interests.

Having regard to the width of language contained in s 89 it is difficult to understand how it can be said that a grantee of an equitable mortgage or charge did not have sufficient estate or interest in land to protect by lodging a caveat. The use of the word "otherwise" should not be limited in its connotation except by other provisions of the Transfer of Land Act, or by the law of property. There appears to be no reason why an interest or estate recognized in the Court of Equity could not be comprehended by the use of such expression." (emphasis added)

19 On this basis, all three categories of interest, (a), (b) and (c) as expressed by Batt J in Classic Heights, are caveatable. This is the necessary conclusion so long as it is recognised that equitable interests may co-exist with Torrens legislation. The argument that the general nature of the Torrens legislation forbids such a conclusion is a question that was considered by the Privy Council when their Lordships explained the relationship between equitable and legal proprietary interests under the Torrens legislation in Lapin v Abigail.[31] This is consistent with the concept of a caveat being a "statutory injunction" as described by Barwick J in J & H Just (Holdings) Pty Ltd v Bank of New South Wales.[32]

20 In my view the words in s 89(1) of the Transfer of Land Act are plain and ought to be applied as meaning what the words say. The words are cast so as to encompass a range of circumstances that may arise in the context of commercial transactions concerned with land. The categories are not closed by the imposition of a narrow concept of traditional "caveatability". In my view such an approach steers away from proper analysis and consideration of the nature of the interest that a caveator may seek to protect. In essence, a caveat is a quasi injunction to preserve the status quo. The word "otherwise" in s 89(1) is reflective of and consistent with that purpose.

21 Accordingly, in appropriate circumstances, an equitable interest in land is capable of supporting a caveat even where that interest will not compel the registered proprietor to deliver a registrable instrument.

22 The breadth of this proposition, and its potential for the lodging of unsubstantiated or vexatious caveats, is invariably tempered by the exercise of the wide judicial discretion[33] in s 90(3) of the Act which states:

"(3) Any person who is adversely affected by any such caveat may bring proceedings in the Court against the caveator for the removal of the caveat and the Court may make such order as the Court thinks fit."

In such proceedings, the onus is on the caveator to justify the maintenance of his or her caveat.[34]

23 As a starting point or, indeed, characterised as a point of distinction between this case and Swanston is the pivotal feature of a unit trust compared with a mortgagee's duty. Of course, a unit trust bears the important entitlement or conferment of a proprietary interest in all of the property that is subject to the relevant trust deed. Furthermore, the extent of the unit holder's beneficial interest is proportionate between the units of the individual unit holder and the total number of units issued.

24 I turn then to one of the main questions in this case. The trustee of a unit trust holds property on trust for the benefit of unit-holders. Each unit-holder has an interest in the trust property pro rata their subscription to the trust. Monies yielded from the trust property are distributed accordingly. Despite this general description, the exact nature and shape of a unit trust will depend on the exact terms of the deed giving rise to its existence.[35] A unit trust is of course different from a discretionary trust or a constructive trust as considered in Walter v. Registrar of Titles & Anor.[36]

25 A unit trust is often compared to a corporate entity. In a different context, Dixon CJ, Kitto and Taylor JJ considered the nature of a unit trust in Charles v Federal Commissioner of Taxation:[37]

"At first sight it may seem that a person who invests in units under a trust deed such as that which is here in question does so with a view to obtaining the half-yearly distributions for which the deed provides, just as he might have bought shares in an investment company with a view to deriving half-yearly dividends from them; and that the periodical distributions received should be regarded as income in the one case just as they would be in the other. Some such view, indeed, would appear to be suggested by the brochure which the managers issued, for the amount to be received by a unit holder in a half-yearly distribution is spoken of throughout that document as income of the unit. But the view is untenable, for a unit held under this trust deed is fundamentally different from a share in a company. A share confers upon the holder no legal or equitable interest in the assets of the company; it is a separate piece of property; and if a portion of the company's assets is distributed among the shareholders the question whether it comes to them as income or as capital depends upon whether the corpus of their property (their shares) remains intact despite the distribution. But a unit under the trust deed before us confers a proprietary interest in all the property which for the time being is subject to the trust of the deed: Baker v. Archer-Shee; so that the question whether moneys distributed to unit holders under the trust form part of their income or of their capital must be answered by considering the character of those moneys in the hands of the trustees before the distribution is made."

26 Further, the relationship of one unit-holder vis-à-vis another unit-holder is different from that between the members of a company.[38] However, invariably the exact nature and shape of a unit trust will depend on the exact terms of the deed giving rise to its existence.[39]

27 For present purposes, it is necessary to consider whether a unit-holder in a unit trust has a proprietary interest in the trust property. The facts in Costa & Duppe Properties Pty Ltd v Duppe & Ors[40] were much the same as the facts in this case; an incorporated trustee of a unit trust sought the removal of an alleged beneficiary's caveat. In that case Brooking J said:[41]

"Light was thrown on the nature of the interest of a beneficiary under a unit trust by the High Court in Octavo Investments Pty Ltd v Knight, although that case did not concern a unit trust. The trust fund was held for five companies on trust to pay the income to them in equal shares and to distribute the capital equally between them on the "vesting day". The trust deed, in addition to giving the trustee many other powers, authorized it to carry on any business as it thought fit and to employ the whole or part of the trust fund in doing so. Despite the wide powers conferred on the trustee the High Court, as it seems to me, accepted that the five companies for whose benefit the business was being carried on each had a proprietary interest in the trust assets. The Court was, it is true, concerned with the interest, not of the beneficiaries, but of the trustee, but in recognizing the proprietary nature of the trustee's interest the Court also recognized the proprietary nature of that of the beneficiaries. So...their Honours refer to the two classes of person having a beneficial interest in the trust assets: the beneficiaries and the trustee. From the context...it is plain that the expression "beneficial interest" is, as regards the trustee, used in the sense of a proprietary interest in the trust assets, and I take their Honours to use the expression in the same sense in relation to the beneficiaries. But the most important authority for present purposes is Charles v Federal Commissioner of Taxation... That case concerned a unit trust which was not a trading but an investment trust. The trust fund comprised shares, debentures and other securities. The deed did not empower the trustee to traffick in securities, but gave a wide power to vary investments; other powers and duties are mentioned at p. 606. The following passage appears at p. 609 of the judgment of Dixon CJ, Kitto and Taylor JJ: "But a unit under the trust deed before us confers a proprietary interest in all the property which for the time being is subject to the trust of the deed", and Baker v Archer-Shee is cited. It appears from p. 605 that by the deed the beneficial interest in the trust fund was divided into units, that the managers were entitled initially to the whole beneficial interest in the trust fund and that the trustee was to retain the trust fund in trust for the certificate holders. None of these provisions is set out verbatim. In the passage cited from p. 609 the Court does no more than refer to the Archer-Shee Case.

To my mind, having regard to the New Zealand Insurance Case, the Octavo Investments Case and what is said in Charles v Federal Commissioner of Taxation, the conclusion is inescapable that the unit-holders in the Costa and Duppe Properties Unit Trust have a proprietary interest in all the property which is for the time being subject to the trust deed...

A unit-holder has a proprietary interest in each asset of the trust notwithstanding the possible duration of the trust, the extremely wide powers or management given to the trustee and the possibility that the trust might lose the whole or part of its capital through unprofitable trading or speculation."

28 This was followed by Hedigan J in McCarthy v Wheeler & Wongan Hotels Pty Ltd[42]and accepted, without argument, by O'Bryan J in Evindon Pty Ltd v Ambassax Pty Ltd & Anor.[43]

Can an Interest in a Unit Trust Support a Caveat?

29 In support of the argument that a unit-holder in a unit trust does have an interest sufficient to support a caveat, the respondent relied on Duppe. As I have already observed, this case supports the proposition that a unit-holder in a unit trust has a proprietary interest in the trust property. However, contrary to the respondent's argument, Duppe does not stand for the proposition that a unit-holder in a unit trust holds an interest sufficient to support a caveat under s 89(1).[44] This is clear in light of Brooking J's express confinement of the case:[45]

"Each of the three caveats which remain the subject of dispute claims "an equitable estate or interest in fee simple". The grounds of the claim are set out, and from these it appears that the claim is based on the deed constituting the unit trust...The applicant says simply that the caveator, Duppe Holdings Pty. Ltd., has no estate or interest in land within the meaning of s89(1). No argument has been addressed to the nature of the estate or interest claimed in the caveats or the precise grounds of claim set out in them, and the issue presented for my determination is, not whether the three caveats claim an estate or interest in land on a ground that may be supported, but whether, regardless of the nature of the estate or interest claimed and the precise ground set out in the caveats, the caveator has an estate or interest in the three pieces of land. The answer to this question, and so the outcome of the application in so far as it is contested, has been treated by the parties as depending on whether a unit-holder has, by virtue of the deed constituting this unit trust, a proprietary interest in land forming part of the trust fund. Accordingly it is with that question, and that question alone, that I am concerned. At one stage Mr. Beaumont appeared to be founding an argument on what is said in Miller...concerning unregistered instruments, but he did not persist in this submission, and I have therefore not considered it." (emphasis added)

30 Although Duppe does not stand for the proposition claimed by the respondent, that is not to say that this proposition might ultimately be reached. In Evindon, O'Bryan J held that "A unit-holder's proprietary interest in each asset of the trust does not confer a caveatable estate or interest for the purposes of [the Act]".[46] Contributing to this decision, however, was O'Bryan J's finding that the caveator "does not wish to register a dealing in the land in priority to another person's interest, it simply seeks to promote its interest in litigation commenced in separate proceedings against the trustee".[47] O'Bryan J later states, "The legal relationship between the trustee...and a unit-holder does not confer upon the unit-holder a right to frustrate or curtail the exercise of the very wide powers of management conferred on the trustee by the trust deed".[48] Further, O'Bryan J found that to allow the caveat to remain "may result in the trust losing the whole or part of its capital through a mortgagee's sale."[49]

31 Evindon illuminates a problem inherent in allowing a unit-holder in a unit trust to maintain a caveat, namely, the threat that a minor unit-holder will lodge a caveat to the detriment of the trust as a whole, or rather, to the detriment of larger unit-holders. This problem, however, does not derogate from the conclusion that I have reached above with respect to caveatable interests - for that conclusion flows naturally from the wording of the relevant provision in the context of the relevant law on the topic. Rather, the problem raised in Evindon is ameliorated by the exercise of the wide judicial discretion conferred upon a judge under s 90(3) of the Act[50] - a question separate from the question as to what interests may found a caveat under the Act. Indeed, it is unclear whether O'Bryan J's decision in Evindon was founded upon the exercise of this discretion or upon the precise wording of the trust deed in that case.

32 Without being exhaustive, the proper exercise of the discretion under s 90(3) will involve considering: in which party's favour the balance of convenience lies;[51] whether there is a serious question to be tried;[52] and whether the caveator claims an interest wider than what the caveator may be entitled.[53] These questions inform the ultimate consideration, that is, whether the caveator has discharged his or her onus of justifying the maintenance of the caveat.[54] The process is comparable to the exercise undertaken in granting or denying an interlocutory injunction.[55] Such is the nature of this exercise, the problem highlighted above in Evindon is subsumed by the questions of whether there is a serious question to be tried and in which party's favour the balance of convenience lies.

33 On this basis, I conclude that, depending on the terms of the trust deed, a unit-holder to a unit trust may possess an interest sufficient to support a caveat.

The Nature of the Respondent's Interest

34 The trust deeds in the present matter are in the same terms. It is a matter of contention between the parties whether the relationship between the respondent and the applicants is subject to this deed. I proceed on the basis that it is.

35 Under the heading "Effect of this Deed and Declaration of Trust" is cl 6 which states:

"6 The Original Unit Holders hereby direct and the Original Unit Holders and Trustee hereby agree and declare that the Trustee shall stand possessed of the Trust Fund and of income of that fund (including any business of whatever nature carried on by the Trustee) for the benefit of the general beneficiaries and of the Unit Holders in proportion to the number of units respectively held by them of each class of unit and the respective rights of each class of unit. The Trustee acknowledges that subject to the discretionary entitlements of the general beneficiaries the Unit Holders are and shall be beneficially entitled to all assets of whatever nature of the Trust Fund in accordance with the respective rights of each class of unit in proportion to the number of units respectively held by them of each unit." (emphasis added)

36 Under the heading "Administration of the Trust" is cl 7 which states:

"7(a) The beneficial interest in the assets of the Trust Fund as originally constituted and as existing from time to time shall be vested in the Unit Holders for the time being.

(b) Each person who becomes registered as a Unit Holder shall be deemed to have agreed to become a party to this Deed and any supplemental deed and shall be entitled to the benefit of and shall be bound by the terms and conditions of this Deed and of any supplemental deed." (emphasis added)

"8 Each unit shall entitle the registered holder thereof together with the registered holders of all other Units to the beneficial interest in the Trust Fund as an entirety but subject thereto shall not entitle a Unit Holder to any particular security or investment comprised in the Trust Fund or any part thereof and no Unit Holder nor any combination of Unit Holders shall be entitled to the transfer of any assets or property comprised in the Trust Fund and save as hereinafter provided, no Unit Holder shall be entitled to interfere with or question the exercise or non-exercise by the Trustee of any discretion in relation to the Trustee's ownership of such assets or property or in relation to the conduct of any business carried on by the Trustee or otherwise." (emphasis added)

38 It is important to note that the respondent is not an original signatory to either of the deeds. Further, he is not listed in the second schedules to either trust which purport to list those who become unit-holders subsequent to the original sealing of the deed. This, however, may be of little consequence because of the allegations of fraud and deceit involving Maddocks. In any event, the respondent and his solicitors have sworn on affidavit to the respondent's interest in a trust. In my view these are matters to be ventilated by the parties at trial.

39 In any event, the trust deeds at hand are, in some respects, similar to that in Duppe.[56] From cl 6-7 it is arguable that the respondent, should he prove to be a party to the either of the deeds, has a beneficial interest in the trust property. From cl 8 it is arguable that, despite this interest, the respondent is not entitled to any document executable under the Torrens legislation. However, for the reasons stated above, this does not preclude the respondent from lodging a caveat over the land.

Should the Court, in exercise of the discretion conferred by s 90(3) of the Act, allow the caveats to remain?

Serious Question to be Tried

40 The facts have been set out above. The factual issue that is unclear, and in my opinion justifies the subsistence of the caveat, is the authority of Maddocks in his dealings with the respondent and the level of knowledge with which the defendant companies can be imputed. In this respect, there is a serious question to be tried.

Balance of Convenience

41 On the matter of the balance of convenience, the applicants wish to develop the properties. The applicants claimed that if the Court allowed the caveat to remain until the substantive dispute between the parties was settled, this would prevent the trust obtaining funds for the development of the properties. Such funds would be secured by a mortgage or other interest over those properties. Having examined the material adduced via affidavit I accept that the applicants will not secure further financing whilst the caveats remain. The applicants also claim that they are incurring holding and other costs due to the delay in the development of the properties. Further, the caveats may hinder planning applications for sub-division of the properties. No undertaking as to damages was sought against the respondent.

42 Ultimately, that inconvenience must be weighed against the potential for the respondent's claim to be defeated by the registration of another (registrable) equitable interest. Mr de Groot states in his affidavit on behalf of the applicant:

"[F]rom the viewpoint of the investors, and having regard to the duties of the Trustee it would not be prudent to borrow any further funds...to complete the building if it is not known what the extent of the interest claimed is...and it is not known whether clear and unencumbered title can be made available to any prospective purchaser, and indeed when in time such clear and unencumbered title may be given to the purchaser. In summary, to borrow additional funds to complete the building whilst it is unknown -

•

what the extent of the interest claimed is

•

when that might be finally determined

•

when clear title would be available for any prospective purchaser

would in my belief not be acting in the best interests of the investors and not be prudent."

43 The removal of the caveat will not finalise any of the uncertainties stated by Mr de Groot. The extent of the respondent's entitlement, if any, will be equally uncertain. The removal of the caveat being of no avail in these circumstances, I consider that the balance of convenience falls in favour of the respondent.

Broad Statement of Interest and Prohibition

44 A further issue is the nature of the interest claimed by the respondent in the caveat. Counsel for the applicants contended that the interest (and its concomitant prohibition) was stated too broadly and that, therefore, the caveat should be removed.[57]

45 There are two contentious caveats. Both caveats are stated in a standard form provided by the Registrar of Titles. The first of these was lodged in respect of 28 Myola Street (Volume 6616 Folio 154) on 21 November 2005 (caveat no AE012566Y); the second of these was lodged in respect of 10-12 Myola Street (Volume 4628 Folio 552 and Volume 5428 Folio 443) on the same day (caveat no AE0112562H). The caveats are in similar terms. Under the heading "Estate or Interest Claimed", both caveats state "an estate in fee simple". Under the heading "Grounds of Claim", the second caveat states "As a unit-holder in the Property Syndicate No 5 of which the registered proprietor is the Trustee, the subject land being as (sic) asset of the said Property Syndicate No 5". Such is the nature of the respondent's claim in the substantive proceeding, the third caveat is of the same wording except "Property Syndicate No 5" should be replaced by "Property Syndicate No 4". Under the heading "Extent of Prohibition", both caveats state "ABSOLUTELY".

46 As illustrated in Lewenberg & Pryles v Direct Acceptance Inc Ltd,[58] a court may remove a caveat because it is stated too widely. In that case the applicants seeking the removal of the caveats were registered mortgagees who wished to execute a mortgagee's sale over the relevant land. The caveator was an unregistered mortgagee whose interest arose later in time. Forbidding the transfer of the property, the breadth of the prohibition stated on the caveat was stultifying the registered mortgagee's attempts to have the property sold. Both parties to the application being mortgagees, it was in both their interests that the property be sold. Consequently, O'Bryan J saw it of no real prejudice to the respondent that its caveat be removed. The respondent having not offered to amend the terms of the caveat (as a caveator may offer to do to avoid having its caveat removed)[59], it was ordered that the caveat be removed altogether.

47 The interests of the parties are not so clear in this case. Such is the nature of the respondent's claim to the relevant property, it is uncertain whether the interest stated on the caveat (and the concomitant prohibition on dealings with the land) is stated too broadly. It is apparent from the cases that come before this Court[60] that a practice has developed whereby caveators (presumably through their solicitors) immediately opt for an absolute prohibition on dealings with the land. Indeed, I believe this is the default position on the form.[61] Further, it has been noted that the form provided by the Registrar of Titles does not reduce the problems caused by a "lack of comprehensive administrative, judicial guidance, or legislation on how to describe the estate or interest or how to limit the prohibition expressed in the caveat".[62]

48 In light of the uncertainty surrounding the facts in this case, I do not consider that the applicants will be prejudiced to a degree sufficient to outweigh that done to the respondent by removing his caveat.

Conclusion

49 I consider the respondent has discharged his onus of satisfying the Court that the caveats should remain until the final determination of the matter at trial. The applicants' summons should be dismissed.

[1] Volume 6616 Folio 154

[2] Volume 4628 Folio 552 and Volume 5428 Folio 443.

[3] (1994) V Conv R 54-506, 65 791 ('Classic Heights').

[4] (1995) V Conv R 54-529, 66 287 ('Crampton').

[5] Classic Heights (1994) V Conv R 54-506, 65 793.

[6] Ibid 65 797.

[7] [1963] AC 484 ('Miller').

[8] Ibid 497.

[9] (1900) NZLR 517, 537.

[10] Crampton (1995) V Conv R 54-529, 66 291.

[11] [1917] HCA 9; (1917) 23 CLR 78, 91.

[12] [1977] VicRp 62; [1977] VR 561.

[13] (1983) V Conv R 54-071, 62 405 ('King').

[14] Crampton (1995) V Conv R 54-529, 66 293.

[15] (1994) V Conv R 54-506, 65 766.

[16] Ibid 65 767.

[17] Ibid 66 294.

[18] Ibid 66 295.

[19] (1995) V Conv R 54-531, 66 300.

[20] Ibid 66 307.

[21] [1995] VConv R.66, 138

[22] Ibid 66 143.

[23] (1992) 5 BPR 11, 734.

[24] Ibid, 11 738 - 9.

[25] [1996] NSWSC 3; (1995) 38 NSWLR 286, 287 (citations omitted).

[26] Mary-Anne Hughson, Marcia Neave and Pamela O'Connor, "Reflections on the mirror of title: resolving the conflict between purchasers and prior interest holders", (1997) 21 MULR 461.

[27] [1994] 1VR 672, 678.

[28] [1965] HCA 17; (1965) 113 CLR 265

[29] See above n 26, 475.

[30] [1977] VicRp 62; [1977] VR 561, 566-7 (citations omitted).

[31] [1934] AC 491.

[32] [1971] HCA 57; (1971) 125 CLR 546, 552.

[33] See Commercial Bank of Australia Ltd v Schierholter [1981] VicRp 32; [1981] VR 292.

[34] Lewenberg & Pryles v Direct Acceptance Inc Ltd [1981] VicRp 36; [1981] VR 344; Bell v Graham Ors [2000] VSC 2000; McMillan v Dunoon [2005] VSC 440; Austwide Property v Vukasinec [2004] VSC 333.

[35] CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53, [10].

[36] [2003] VSCA 121 [15], [16].

[37] [1954] HCA 16; (1954) 90 CLR 598, 608-9 (citations omitted).

[38] See, eg, AF & ME Pty Ltd v Aveling [1994] FCA 1256; (1994) 14 ACSR 499.

[39] CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53, [10].

[40] [1986] VicRp 9; [1986] VR 90 ('Duppe').

[41] Ibid 95-96.

[42] [1998] VSC 76, [37].

[43] (1995) V Conv R 54-534 ('Evindon').

[44] Ibid 66 357.

[45] Duppe [1986] VicRp 9; [1986] VR 90, 92.

[46] Evindon (1995) V Conv R 54-534, 66 358.

[47] Ibid.

[48] Ibid.

[49] Ibid.

[50] See also s 118 which provides that any person lodging a caveat without reasonable cause shall be liable to compensate any person who sustains damage thereby, as the court deems just; Goldstraw v Goldstraw & Anor [2002] VSC 491.

[51] Gibson v Co-ordinated Building Services Pty Ltd (1989) NSW Conv R 55-481; Mitrangas v Makalias [2003] VSC 251; Lawrence v Appleby [2001] NSWSC 649.

[52] Austwide Property v Vukasinec [2004] VSC 333.

[53] Lewenberg & Pryles v Direct Acceptance Inc Ltd [1981] VicRp 36; [1981] VR 344.

[54] Ibid; Bell v Graham & Ors [2000] VSC 2000.

[55] Eng Mee Young v Lechtumanan [1980] AC 331, 335.

[56] Duppe [1986] VicRp 9; [1986] VR 90, 92.

[57] As was the case in Lewenberg & Pryles v Direct Acceptance Inc Ltd [1981] VicRp 36; [1981] VR 344.

[58] [1981] VicRp 36; [1981] VR 344.

[59] Re Victorian Farmers' Loan & Agency Co Ltd [1897] VicLawRp 117; (1897) 22 VLR 629; Middwarren Estates Pty v Retek & Stivic [1975] VicRp 56; [1975] VR 575.

[60] See, eg, Kambouris & Anor v Marcopoulos & Anor [1997] 4535 of 1997 (Unreported, Coldrey J, 14 March 1997); see also Goldstraw v Goldstraw & Anor [2002] VSC 491.

[61] See CCH, Victorian Conveyancing Law and Practice, vol 1 (at 122-5-94) 19-320.

[62] Ibid 19-310.