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[2006] VSC 281
Supreme Court of Victoria
2006-08-02
GILLARD J
Original judgment source is linked above.
CAVEAT - Application to remove - Section 90(3) of Transfer of Land Act 1958 - Caveat defective in form - Power to amend - Extent of power - Failure to prove a caveatable interest.
1 In this proceeding instituted by an originating motion, the plaintiff seeks an order that a caveat lodged in respect to a parcel of land be removed pursuant to of the ("the ").
Parties
2 The plaintiff, Depas Pty Ltd ("Depas"), is a family company operated by Anthony De Pasquale, who is a business development manager. Depas is the registered proprietor of land situated at 4 Judith Street, Carnegie in the State of Victoria, more particularly described in Certificate of Title Volume 7203 Folio 423 ("the property"). Depas developed the land by building two townhouses on it, and each has been sold pursuant to contracts of sale, with settlement now due.
3 The first defendant, Mr Christopher Dimitriou ("Mr Dimitriou"), is a builder. He is the sole director of the second defendant, PACD Pty Ltd ("PACD").
4 The third defendant is the Registrar of Titles. In accordance with usual practice, the Registrar has forwarded a letter to the Court stating that she does not intend to appear in the proceeding and will abide the result.
The dispute
5 The basic facts which led to the dispute can be briefly summarised. Mr Dimitriou was engaged as a builder by Mr De Pasquale's wife to build a home in Glen Iris. During the course of the construction, Mr De Pasquale had discussions with Mr Dimitriou and informed him that he was on the look-out for properties to purchase and develop. He also told him he was interested in finding a builder to carry out the building work. In January 2005, whilst Mr De Pasquale was on holiday in Queensland, he received a telephone call from Mr Dimitriou, who stated he had found a property at 4 Judith Street, Carnegie. He told Mr De Pasquale that the purchase price was $410,000. They agreed that the property would be purchased in Mr Dimitriou's name and that he was to pay the deposit. The amount of the deposit was to be later repaid to Mr Dimitriou. Mr Dimitriou was to purchase in his name with a nomination clause, and a company would be nominated as purchaser prior to settlement.
6 Mr Dimitriou purchased the property on 5 January 2005 and paid the deposit of $25,000. On 2 February 2005, he executed a document nominating Depas as the purchaser.
7 According to Mr De Pasquale, he offered Mr Dimitriou part of the development but Mr Dimitriou declined the offer as he told Mr De Pasquale he did not have the necessary funds. Mr De Pasquale's version is disputed by Mr Dimitriou. It is the latter's version that the property was to be a joint venture development. Mr Dimitriou prepared some drawings. There were discussions had between the parties concerning the funding of the proposed development. Again, there is some dispute between the parties as to the funding arrangements. Mr De Pasquale was of the view that Mr Dimitriou, through his company, was employed to carry out certain works such as design and other matters. His company was in fact paid for the services. Mr De Pasquale's understanding was that Mr Dimitriou was supplying services but was not a party to the development. According to Mr Dimitriou, after settlement he continued to work towards planning approval and had discussions with a company called P3 Constructions Pty Ltd, a building company proposed by Mr De Pasquale. In July 2005, PACD was repaid the sum of $14,958.85 for services rendered.
8 Mr Dimitriou, through his company, continued to supply services. In October 2005, the parties fell out. According to the version given by Mr De Pasquale, it was in mid-2005 that disputes arose between his wife and Mr Dimitriou over cost escalations and in August 2005, Depas contracted with a builder, Stylecraft Builders, for the construction of two townhouses. Depas obtained finance from the National Australia Bank to purchase the property and fund the development. The loan amount was in the order of $700,000. According to Mr Dimitriou, he was told in October 2005 by Mr De Pasquale not to set foot on the land again and he was then threatened.
9 The properties are nearly complete and have been sold. Depas is anxious to settle the contracts.
10 The version given by Mr Dimitriou is to some extent supported by a solicitor, Frank Romeo, who swore an affidavit in the proceeding. I note that Mr Romeo has known Mr Dimitriou for many years and they have been in business together. According to Mr Romeo, on 2 February 2005 a conference took place between Mr Romeo and Messrs Dimitriou and De Pasquale, and during the meeting both invited Mr Romeo to join them in the proposed development as partners. Eventually, Mr Romeo declined their offer. Mr Romeo's evidence provides some support for the view that there was a joint development of the property involving Messrs De Pasquale and Dimitriou.
11 On 2 May 2006, Mr Dimitriou and PACD lodged a caveat over the property. The estate or interest claimed was expressed to be:
"As beneficial owner pursuant to an implied trust."
13 This caveat was not lodged until 2 May 2006, which is many months after the parties evidently fell out. The sales of both houses are now ready for settlement and the presence of the caveat has delayed settlement, although it appears that the Plan of Subdivision has not been registered as yet. Hence the application to remove the caveat.
Estate or Interest
14 It is the contention of Depas that the caveat is defective in form in that the estate or interest claimed by the two caveators does not specify with precision the estate or interest they claim. It is noted that the caveat failed to state with accuracy the nature of the interest claimed, in that the two caveators claimed "an interest in fee simple", but no mention is made as to whether they were tenants in common, and if so in what shares, or joint tenants. In addition, it is said that the grounds of the claim do not give any detail as to the trust, how and when it was established, and how it was implied. It is further stated that an equitable interest was claimed, yet the estate was described as an estate in fee simple, which is a legal estate. Reference was made to what three members of the High Court said in Leros Pty Ltd v Terara Pty Ltd,[1] where Mason CJ and Dawson and McHugh JJ said:
"It has been said that the purpose of requiring the caveator to 'specify' the estate or interest claimed is to enable the registered proprietor to know, or find out, the claim which he or she will have to meet. It has also been said that another purpose is to enable the Registrar-General to determine whether a dealing lodged for registration is inconsistent with the estate or interest claimed by the caveator."
15 Their Honours then stated what, in my view, is the appropriate test, when they said:
"In the ultimate analysis it seems to us that 'specify' should be understood in the sense of 'mention definitely or explicitly'."
16 To assert that the caveator has an "estate in fee simple" expresses a caveatable interest, but when considered in the light of Depas being the registered proprietor, the description creates a degree of uncertainty. The grounds of claim, on the other hand, state proper grounds which may establish an interest, but when read with the estate or interest claimed, again create uncertainty. One might think that the estate as claimed, "an estate in fee simple", is expressed to be the legal estate, yet the grounds of claim support an equitable estate. The problem is further compounded when one considers the evidence of Mr Dimitriou. On no view could it be said that he or his company based on that evidence have an interest which is a complete interest and not a part interest.
17 Mr Cawthorn of counsel for the first and second defendants, accepted that on its face, the caveat did not properly express the proper estate or interest and further, that the grounds relied upon were inconsistent with the interest claimed. He applied for leave to amend the caveat. A caveat should state the nature and quantum of the estate or interest claimed. Mr Cawthorn applied to delete the estate or interest claimed in the caveat and substitute the following:
"An equitable interest as co-owner of an undivided share."
18 The Court has power to grant leave to amend a caveat. See In Re The Victorian Farmers' Loan and Agency Co Limited;[2] Queensland Estates Pty Ltd v Co-Ownership Land Development Pty Ltd;[3] and Midwarren Estates v Retek.[4]
19 In the 1897 Full Court decision, the Court was of the view that it had power under the equivalent of s.90(3) of the present Act to amend the caveat. The present application is made under s.90(3) and on such an application "the Court may make such order as the Court thinks fit". (Emphasis added). This clearly gives a wide power to the Court to amend the caveat.
20 In Midwarren Estates v Retek, Menhennitt J was of the view that s.90(3) would not permit an amendment which would result in the substitution of an entirely inconsistent estate or interest.
21 Whether or not the power to amend should be restricted in that way is a moot point. There is a strong argument that it should not be so limited. As Mr Cawthorn pointed out, if the caveat was removed on the ground that it was defective, there would be nothing stopping the caveator from lodging another caveat immediately, setting out the proper estate or interest claimed. In the circumstances, the new caveat would not be prohibited by s.91(4). Viewed in that way, there is much for saying that the power to amend should not be so limited. If a new caveat was lodged, the parties would be back before the Court some weeks later. Because of my views as to the outcome of this application, I am prepared to proceed on the assumption that the interest claimed by the caveators is as expressed by Mr Cawthorn in his application to amend. It follows that I do not have to determine whether Menhennitt J's views are correct.
The application
22 Depas asserts that not only is the caveat defective, but the evidence does not establish any caveatable interest.
23 The Act confers title by registration. Under the principle of immediate indefeasibility, the caveat provides protection from registration of a competing interest. See Fraser v Walker;[5] and Breskvar v Wall.[6] The main purpose of a caveat is to protect the caveator's interest from being defeated by the registration of another dealing. The caveat provides protection in that the caveator is given notice of a new dealing, and is given the opportunity to issue a court proceeding to obtain an order to give effect to his claimed interest. The caveat procedure provides an interim protection, freezing the position until the caveator takes steps to have his interest declared and registered. See Miller v Minister of Mines.[7] In Leros Pty Ltd v Terara Pty Ltd, supra, Mason CJ, Dawson and McHugh JJ, at p.422 described the effect of a caveat as follows:
"The purpose of a caveat, as stated earlier, is to operate as an injunction against registration of an inconsistent dealing otherwise than in accordance with the caveat so as to enable, in the ultimate analysis, a determination of the conflicting claims."
24 The first matters for the Court to consider on an application such as the present are the terms of the caveat, whether it discloses a caveatable interest, and whether there is any evidence to support that caveatable interest.
25 I have already stated that I propose to consider this application on the basis that the caveators claim an equitable interest as co-owners of an undivided share in the property, and that it arises out of an implied trust. The question then remains, does the evidence support that caveatable interest?
26 The evidence concerning the relationship between the various parties is very much in dispute. Mr Dimitriou, in his affidavit sworn 6 July 2006, stated:
"Accordingly, Mr De Pasquale suggested that the parties nominate the contract of sale to Depas Pty Ltd ('Depas') and he would organise the funds from NAB upon the application of Depas and it was agreed that the parties would develop the land jointly and upon the sale of the units and repayments of funds to NAB and agents' commissions the residue of the sale proceeds would be split equally between them."
27 This version is disputed. Mr De Pasquale stated that Mr Dimitriou was offered an interest but declined, and that thereafter, his involvement was the provision of services for which he and his company were paid. But if Mr Dimitriou's version is correct, the alleged joint arrangement was that Depas was to be the owner of the land, the development of it was to be jointly undertaken, and Mr Dimitriou and/or his company were to have half the net profits of the venture. Importantly, there is no evidence that it was agreed between the parties that Mr Dimitriou or his company were to have any legal interest in the property. The mere fact that parties enter into an agreement to develop property and to share the profits does not of itself result in the parties having a proprietary interest in the property. On Mr Dimitriou's version, at most there is a joint venture agreement, a term of which was that the net profits were to be split between the joint venturers, but it does not follow that it was the common intention of the parties that each should have an interest in the property developed. In my opinion, there is no evidence that it was a term of the agreement that each party would have an interest in the real estate. Further, the evidence raises real doubts as to the true nature of the relationship. The first and second defendants' solicitor wrote to the plaintiff's solicitors on 5 July 2006 and stated:
"In essence, our instructions are to the effect that the parties agree that they would jointly develop the property at 4 Judith Street Carnegie ('the land') in partnership as to 50% being held by your client and 50% being held by our clients ('the partnership'). It is said on behalf of the caveators that the interest arose out of an implied trust."
(Emphasis added).
28 Mr Romeo in his affidavit also refers to the relationship as one of partnership. So what in fact was the relationship?
29 If Mr Dimitriou's version is correct, it would give him a contractual right to half the net profit of the venture and it may even be said that he would have an equitable interest in half the net profits, but it does not follow that that means that he has a half interest in the land. In Epple v Wilson,[8] Gowans J was concerned with the situation where a registered proprietor signed a document to the effect that on the sale of his home, any proceeds due to him would be paid to the caveator. Gowans J held that the caveator acquired an equitable interest in the proceeds of the sale of land, but he had no estate or interest in the land which would support a caveat. He referred to the Court of Appeal decision of Irani Finance Ltd v Singh.[9] His Honour said:[10]
"It is, therefore, clear that an interest in the proceeds of sale of land does not necessarily involve an interest in the land itself, even where there is a trust for sale."
30 Of course, it would be different if there was an agreement between the parties which amounted to a form of charge, or led to the conclusion that it was the common intention of the parties that each should have an interest in the real estate.
31 The alleged agreement here, on the basis that Mr Dimitriou's version was correct, amounts to no more than an agreement as to what was to occur on the completion of the project, namely, a division of the net profits of the project. It is concerned with the contractual rights relating to the outcome of the joint venture and is not concerned with the land.
32 On the other hand, if the true nature of the relationship was one of partnership, the nature of the partners' interest in the property does not entitle a partner to a title to specific property. The High Court said in Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd:[11]
"The nature of a partner's interest in the partnership profit has often been explained. The partner's share in the partnership is not a title to specific property but a right to his proportion of the surplus after the realisation of assets and the payment of debts and liabilities."
33 Taking into account a view of the evidence most favourable to Mr Dimitriou, whether it be a joint venture development or a partnership development, in my opinion, the evidence does not establish that either or both of the first and second defendants have a caveatable interest in the real estate. Accordingly, in my opinion, the caveat must be removed.
34 Subject to any submissions by counsel I propose to make the following orders:
(i) That the Registrar of Titles remove caveat No. AE326488R pursuant to s.90(3) of the Transfer of Land Act 1958 from the Folio of the Register being Certificate of Title Volume 7203 Folio 423.
(ii) That the first and second defendants pay the plaintiff's costs.
[1] [1992] HCA 22; (1992) 174 CLR 407 at 422.
[2] [1897] VicLawRp 117; (1897) 22 VLR 629.
[4] [1975] VicRp 56; [1975] VR 575 at 576-7.
[6] (1971) 126 CLR 376.
[8] [1972] VicRp 50; [1972] VR 440.
[10] At 443.
[11] [1974] HCA 22; (1974) 131 CLR 321 at 327.
Depas Pty Ltd
Dimitriou [2006] VSC 281
(1992) 174 CLR 407
(1971) 126 CLR 376
(1974) 131 CLR 321