Plaintiff v First Defendant

2 Probate of the deceased's will dated 5 August 2009 was granted to his executor, Mr Gary George Leonard, on 5 April 2017. Mr Leonard is Emma's husband and a director of the first defendant. The deceased left the residue of his estate to his four daughters and his nine grandchildren are also beneficiaries.

3 By a writ filed 3 March 2017 in this Court in proceeding S CI 2017 00761 ('the substantive proceeding'), the plaintiff claims that during his lifetime, the deceased made a number of testamentary promises or representations to the plaintiff. As a result of those testamentary promises, he understood that upon the death of the deceased he and his mother would own all of the deceased's assets. The plaintiff claims a beneficial interest in real estate and other property owned by the various defendants on the basis of a constructive trust in relation to a joint family venture, or, alternatively, in accordance with the principles of estoppel or the principles of unconscionability.

4 On 23 June 2017, Anna issued a proceeding against the estate of the deceased and the defendants, claiming substantially similar relief to that of the plaintiff. Anna is the eighth defendant in the substantive proceeding.

5 The deceased's ex-nuptial son also commenced a proceeding against the estate seeking provision under Part IV of the Administration and Probate Act 1958.

6 On 17 August 2017, pursuant to s 74F of the Real Property Act 1900 (NSW) ('Real Property Act'), the plaintiff lodged three caveats with the Registrar-General in New South Wales over real property owned by the defendants in New South Wales. The plaintiff claimed a beneficial estate or interest by way of a constructive trust as to part or whole of the titles that were the subject of the caveats. Before lodging the caveats, the plaintiff's solicitors requested the executors of the estate and the defendants to provide undertakings not to deal with or dispose of the relevant real estate pending the determination of the plaintiff's claim, however, no undertakings were given by them.

7 Pursuant to s 74H(1)(a) of the Real Property Act, once a caveat is recorded on the title to the land, the Registrar-General must not record any dealing on the title except with the written consent of the caveator. Pursuant to s 74J of the Real Property Act, a registered proprietor can apply to the Registrar-General for a lapsing notice to be prepared for service on the caveator. Where such a notice is prepared and served on a caveator, the caveator must apply to the Court for an order extending the operation of the caveat for such period as the Court may specify. On 12 September 2017 and 25 September 2017, the plaintiff was served with lapsing notices for the relevant properties on behalf of the defendants.

8 By a summons originally filed on 25 September 2017 in New South Wales, the plaintiff sought orders pursuant to s 74K(2) of the Real Property Act to extend the operation of the three caveats until further order of the Court.

9 On 27 September 2017, Lindsay J transferred the proceeding to this Court, pursuant to s 5(2)(b) of the Jurisdiction of Courts (Cross Vesting) Act 1987 (NSW). Upon the transfer of the proceeding to Victoria, the parties agreed to file written submissions for the determination of the plaintiff's summons.

10 The plaintiff was born on 13 October 1971. Anna and the deceased lived together in a de facto relationship until the deceased's death on 8 April 2016, although the length of time they lived together is disputed.

11 The deceased was the director of and held controlling interests in each of the defendants until his death. The deceased worked on and owned a number of businesses from about 1953 and used the income generated by those businesses to acquire further property and assets for himself and for the defendants. Throughout his life, the deceased maintained, improved and increased the value of these properties and assets. The assets of the third defendant are held as trustee of the Angelo D'Agostino Family Trust created on 24 May 2004.

12 Anna was employed in a business in Dromana known as the 'Bay Motel' owned by the first defendant. Anna performed housekeeping and receptionist duties in the motel business.

13 During the period commencing around 1985 until 1997, the plaintiff was employed by the first defendant at a caravan park business owned and operated by the first defendant in Byron Bay. The plaintiff's duties included the collection of garbage cans, the removal of rubbish and the cleaning of toilets and shower blocks.

14 Between 1980 to 1986, the plaintiff attended various places and activities with the deceased, including cattle sales, property auctions and the deceased's farm at Poowong. Between 1983 to 1985, the plaintiff occasionally attended Maroondah High School in Ringwood East.

15 From 1996 until the deceased's death, the deceased made weekly payments to the plaintiff in the amounts stated in his statement of claim, beginning at around $70−$75 per week and increasing incrementally from time to time to $700 per week at the time of the deceased's death. Since 2005, the plaintiff received superannuation contributions provided by the first defendant.

16 It is common ground that the deceased gave or caused to be given to the plaintiff two properties in Victoria, being 16 Old Lilydale Road, Ringwood East and 25 Drouin Road, Poowong, and two properties in New South Wales, being 25 North Creek Road, Ballina and a vacant block of land in Goonellabah.

17 The deceased's wills made in 1963, 1981 and 1982 are almost identical in terms of the beneficiaries, with the estate divided amongst the deceased's first wife and his four daughters. The deceased's 1989 will had the same residuary beneficiaries as his three earlier wills, however, Anna was devised a life interest in 566 Station Street, Box Hill and an absolute interest in Unit 5, 66 Canterbury Road in Blackburn South ('the Canterbury Road property') and the plaintiff was left the deceased's tools and a motor vehicle. The deceased's 2004 will makes no provision for the plaintiff but Anna was to receive an income of $1,100 per week for her life, subject to adjustment by the Consumer Price Index.

18 The deceased's 2007 will left a life interest to the plaintiff in a farm at Poowong, as well as an absolute interest in the cattle and farm equipment on that property.

Anna was left a life interest in both the Canterbury Road property and the deceased's controlling interest in the first defendant.

19 Under the deceased's last will dated 5 August 2009, the deceased gave small pecuniary legacies primarily to his relatives and others. The plaintiff was bequeathed the cattle and other livestock on the Poowong farm and Anna was bequeathed a life interest in both the Canterbury Road property and the deceased's controlling interest in the first defendant. The deceased left his residuary estate to his daughters.

20 Pursuant to s 11(1)(b) of the Jurisdiction of Courts (Cross Vesting) Act 1987 (NSW), the plaintiff's application is to be determined in accordance with the law of New South Wales.

21 Section 74K(2) of the Real Property Act provides that, on the hearing of an application for an order extending the operation of a caveat:

... the Supreme Court may, if satisfied that the caveator's claim has or may have substance, make an order extending the operation of the caveat concerned for such period as is specified in the order or until the further order of that Court, or may make such other orders as it thinks fit, but, if that Court is not so satisfied, it shall dismiss the application.

22 An application for the extension of the operation of a caveat is treated as analogous to that of an application for injunctive relief.[1] In Australian Broadcasting Corporation v O'Neill,[2] the High Court ruled that the 'prima facie' test as enunciated in Beecham Group Ltd v Bristol Laboratories Pty Ltd,[3] should be preferred to that of the 'serious issue to be tried' approach laid down by Diplock J in American Cyanamid Co v Ethicon Ltd.'[4] In this respect, the High Court observed that it is sufficient that the plaintiff show a 'sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial.'[5] The majority did not object to the use of the phrase 'serious question' if it were understood to convey the notion that 'the seriousness of the question, like the strength of the probability referred to in Beecham, depends... upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought.'[6]

23 As observed by Warren CJ in Piroshenko v Grojsman, the 'courts would be better served by talking of a "prima facie case giving rise to a serious question to be tried" or even "a prima facie case with sufficient likelihood of success to justify the maintenance of the caveat" when deciding such applications.'[7]

24 Once the first component is satisfied, the analysis then turns to the balance of convenience.[8] This involves an assessment as to whether the 'inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.'[9] The Court must weigh up the various discretionary factors in the circumstances of each case. As observed in Bradto Pty Ltd v State of Victoria, the Court should adopt the approach that 'appears to carry the lower risk of injustice if it should turn out to have been "wrong"'.[10]

25 The onus is on a caveator to satisfy the Court that there is a serious question to be tried and that the balance of convenience lies in favour of the extending the operation of the caveat.[11]

26 The plaintiff's caveats claim an estate or interest based on a 'beneficial interest in a constructive trust as to part or whole of the title(s) the subject of this caveat.' A constructive trust claim may form the basis for a caveatable interest in real property.[12]

27 In support of his claim, the plaintiff relies upon the relevant principles of a constructive trust, and estoppel by encouragement, as recently summarised by Sackar J in Wakim v Wakim.[13] These principles are most notably enunciated in the High Court decision of Muschinski v Dodds,[14] and later endorsed by the majority in the High Court decision of Baumgartner v Baumgartner.[15] This assessment involves a practical equation whereby the Court weighs the factors relating to the direct contributions of the plaintiff, made in money or labour, and the indirect contributions, such as support, home-making and family care.[16]

28 There are no affidavits filed by the plaintiff deposing to the facts in his pleadings. His solicitor filed an affidavit sworn 25 September 2017 exhibiting the pleadings and a substantial amount of unhelpful correspondence between the respective solicitors. The correspondence is not evidence of the plaintiff's claim. The defendants submit that because the plaintiff has failed to provide any evidence of his claims, a Jones v Dunkel inference should be drawn.[17]

29 For their part, the defendants have filed numerous affidavits, primarily by members of the deceased's family from his marriage and the executor of the estate. While there is some common ground in relation to the facts, most of the evidence provided by the defendants conflicts with the particulars in the plaintiff's statement of claim.

30 At an interlocutory level, the Court does not resolve conflicts of evidence. The Court takes into account the evidence adduced by both sides in determining whether the plaintiff has established there is a serious question to be tried. Where there is a conflict in the evidence between the plaintiff's witnesses and the defendant's witnesses, it is assumed that the conflict would be resolved in favour of the plaintiff.[18] As the plaintiff has not provided any evidence, the application is to be decided on the facts admitted by the defendants and as deposed to by them in their affidavits.

31 The plaintiff pleads that, over a period of 38 years, he made both direct and indirect contributions to the 'acquisition, maintenance and/or improvement of the properties or assets' of the family business conducted by the deceased and Anna. He claims the deceased 'encouraged the expectation and assumption in the plaintiff that Anna and he would end up owning all the assets that they worked to acquire, maintain and improve during the course of their direct relationship.'

32 The plaintiff pleads that the deceased made a number of representations to him over the course of their relationship as follows:

(a) the deceased said to the plaintiff on many occasions after he had left school words to the effect that 'all of this will be yours one day. You're working for yourself. My family have nothing to do with my business. They're not here, they don't make any contributions';

(b) on occasion when the plaintiff spoke with the deceased about the all-consuming nature of working in the family business, the deceased said 'you're working for yourself, all of this will be yours. It's your business if anything happens to me';

(c) from time to time, the plaintiff spoke with the deceased about the possibility of obtaining a career and working elsewhere. There was also an occasion when the plaintiff was offered a position managing another caravan park. Each time, the deceased said the plaintiff did not have to work elsewhere as everything the plaintiff worked on with the deceased would be the plaintiff's;

(d) on multiple occasions, the deceased told the plaintiff that if he pursued his own career outside of the immediate family, the deceased would cut him out of his will;

(e) on occasions when the deceased and the plaintiff worked at the Poowong farm, the deceased said words to the effect of 'in case anything happens to me, this farm will be yours';

(f) on another occasion, the deceased said to the plaintiff, 'it's your farm, you have to take care of it';

(g) before the plaintiff left school, the deceased told the plaintiff that he was not going to finish school because 'the best education is business and how to be in business';

(h) from time to time, the deceased told other people, such as Mr Theo Ablas, that the Poowong farm and the Lismore Airport property were the plaintiff's;

(i) the deceased said that the land in Italy would one day belong to the plaintiff; and

(j) when the plaintiff did work at the former car yard on the corner of Dawson and Zadoc Street, he wanted to use the land to sell plant and heavy machinery. The deceased refused permission as he told the plaintiff that it would not give the deceased enough of the plaintiff's time if he ran that business. The plaintiff proposed he run the business but that it be a 'family' enterprise. The deceased did not want him to be distracted from the existing family enterprises.

33 The plaintiff pleads that he acted to his detriment in reliance on the encouragement of the deceased and devoted his working life to the furtherance of the deceased's business and property interests and to the maintenance, preservation, improvement and acquisition of the land and other land the subject of the proceeding. He also pleads that he gave up his own career, education and employment opportunities and was paid only a small allowance.

34 The particulars of his claim set out a number of direct contributions made by the plaintiff in relation to some of the properties that are subject to caveats. There are also a number of indirect contributions said to have been made by the plaintiff over the course of the direct relationship with the deceased and the 'joint family venture.' To the extent that the plaintiff claims an interest over all of the properties and assets of the 'family business,' it is unclear why caveats have been lodged against some, but not all, of the properties referred to in the pleading.

35 The defendants' evidence conflicts with the plaintiff's allegations as to the nature and extent of the work completed by the plaintiff over the course of his relationship with the deceased, the reasons for the plaintiff's lack of education and career prospects, the representations, if any, that were made by the deceased to the plaintiff in relation to the properties and the nature of the relationship between the deceased and the plaintiff. In addition, in contradiction to the alleged representations made by the deceased, the majority of his assets passed to his children of his first marriage, not the plaintiff. The deceased's previous wills also did not leave the entirety of his estate to the plaintiff or Anna, contrary to the alleged representations. The plaintiff pleads that, as a result of the deceased's representations, both he and Anna understood that they would own all of the deceased's assets. This pleading is contrary to the asserted beneficial interest solely in the plaintiff's favour claimed by him in the caveats.

36 There is substance in the defendants' submission that, taken at their highest, the testamentary promises attributed to the deceased by the plaintiff did not connote that the plaintiff and Anna, upon the deceased's death, would end up owning real property owned by the defendants and that the plaintiff was not led to believe that he would have a direct proprietary interest in the relevant properties.

37 Further, the properties that are the subject of the plaintiff's caveats are owned by the defendants. The deceased held a controlling interest in the defendants by way of his shareholdings in them. The plaintiff pleads that the deceased's representations were made by him on his behalf. There is no pleading that the deceased made any representations in his capacity as an officer or representative of the defendants to the plaintiff.

38 Shares in a company are regarded as personal property.[19] This means that the interest of a shareholder in the share capital of a company does not extend to the property or assets that are owned by the company. While a company may acquire an estate or interest in land capable of supporting a caveat, the shareholders of that company cannot claim an interest in that land. Generally, a share in a company does not confer upon a shareholder any legal or equitable interest in the assets of the company, as it is a separate piece of property.[20] Moreover, a shareholder has no proprietary interest, legal or equitable, in the assets of a company in which shares are held.[21] As stated by Lord Wrenbury:

the corporator even if he holds all the shares is not the corporation, and ... neither he nor any creditor of the company has any property legal or equitable in the assets of the corporation.[22]

39 For these reasons, the plaintiff has not discharged the onus on him to show that there is a sufficient prima facie case giving rise to a serious question to be tried.

40 Notwithstanding the conclusion that the plaintiff has not satisfied the first issue to be determined, the second issue of the balance of convenience should also be determined, including which course carries the lower risk of injustice.[23]

41 The plaintiff submits that the balance of convenience favours the extension of the caveats by reason of the defendants' consistent failure since July 2016 to provide undertakings not to dispose of the properties the subject of the caveats. He contends that the defendants were unreasonable in refusing to give the undertakings, knowing that the plaintiff would be required to incur additional expense to protect his claimed interest in the proceeding or feel pressured to do so. The plaintiff submits that the choice to lodge caveats instead of applying for injunctive relief was made in the interests of keeping costs reasonable and proportionate and that the defendants caused the plaintiff to initiate the application for an extension of the caveats by applying to the Registrar-General for lapsing notices, rather than requesting the plaintiff remove the caveats.

42 The plaintiff submits there is no risk of dissipation of the properties in question, as noted by the defendants' solicitors in their correspondence, and this factor favours the grant of an extension, given there is no demonstrated inconvenience that will be suffered by the defendants by the removal of the caveats and that such removal will be highly prejudicial to him.

43 The defendants submit that there has never been a threat and there are no circumstances where it might be inferred that the defendants will dissipate their assets to the prejudice of the plaintiff. The defendants have owned the properties since 1986. There is no good reason for the plaintiff to be in a position where he can prevent or impede the orderly commercial dealings of the defendants with various third parties.

44 The defendants point to the width of the terms of the caveats and submit the caveats will cause inconvenience to them, given that they are drawn in broad terms which restrict the defendants from 'any dealing' in relation to the properties. Several properties are, or intend to be, subject to commercial leases to various third parties and the continuation of the caveats on the titles may cause practical problems in this regard. The defendants refer to previous difficulties in obtaining the written consent of the plaintiff to the registration of a lease that the first defendant was contractually obligated to grant in favour of the Commonwealth of Australia. In particular, the defendants note that the plaintiff's conduct in respect of that commercial dealing necessitated an application to be issued in the Court to compel the plaintiff's consent to the transaction.

45 The defendants were not warned of the plaintiff's intention to lodge the caveats, except for what could possibly be discerned from the correspondence between 6 July 2016 and 19 May 2017 exhibited to the affidavit sworn by the plaintiff's solicitor. The defendants dispute the extent to which the plaintiff sought undertakings, as is most clearly demonstrated by the affidavit sworn by the solicitor for the defendants. The defendants contend the first time that undertakings were sought by the plaintiff, in return for the withdrawal of the caveats, was the day before this application was listed for directions on 16 November 2017. The defendants then forwarded draft consent orders, incorporating undertakings, to the plaintiff's solicitors on that day. However, the next day the plaintiff did not agree to the defendants' proposals. Further consent orders were then drafted by the defendants but not accepted prior to the expiry of the offer. The reason given by the plaintiff for the rejection of the offer was that costs were not inclusive.

46 The correspondence in respect of the relevant undertakings in relation to the assets of the deceased's estate commences from July 2016. Most notably, the email from the plaintiff's solicitor on 6 July 2016 states that the executors are put on notice in relation to a Part IV claim and the constructive trust claim. The email includes the following demand for undertakings from the executors that they will refrain from:

... disposing of or otherwise dealing with the assets of the estate or family assets in a way adverse to our client's interests any, prior to our client's foreshadowed claims being either heard or determined or otherwise resolved.

47 The defendants refused to give the undertakings on the basis that the plaintiff has no proprietary claim in the relevant properties. Whilst the plaintiff foreshadowed injunctive relief in the event the undertakings were not given, the lodgement of caveats achieved the same outcome for the plaintiff in terms of the protection of his claim. On this application, both parties were in the position of resolving the matter by way of appropriate undertakings. For the matter not to resolve on the basis that the costs were not inclusive is surprising on the part of the plaintiff, given the long history of the defendants' explanation as to their position on the strength of plaintiff's claim.

48 Overall, the Court is required to assess whether the injury caused to the plaintiff should the caveats be removed outweighs the injury the defendants would suffer if the caveats were extended. Each of the parties appear to accept there is no immediate risk of dissipation of the relevant assets. If the caveats were extended, the most obvious detriment and substantial inconvenience faced by the defendants would be the restriction on their ability to deal with the relevant properties on a daily commercial basis, should the need arise, for example, in relation to the granting of commercial leases in respect of the relevant properties.

49 The plaintiff has not established detriment that outweighs the considerations relied on by the defendants, given the number of properties that are the subject to the caveats and the wide terms of the interest claimed in the caveats. The lower risk of injustice is for the operation of the caveats not to be extended.

50 Accordingly, the plaintiff's application for an order extending the operation of the caveats is dismissed.

[1] Goldstraw v Goldstraw [2002] VSC 491 (14 November 2002) [30]; Schmidt v 28 Myola Street Pty Ltd [2006] VSC 343; (2006) 14 VR 447, 457 [32]; Piroshenko v Grojsman & Ors (2010) 27 VR 489, 491 [7].

[2] [2006] HCA 46; (2006) 227 CLR 57.

[3] [1968] HCA 1; (1968) 118 CLR 618.

[4] [1975] UKHL 1; [1975] AC 396, 407 as cited in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, 83-84 [71]; see also, Piroshenko v Grojsman & Ors (2010) 27 VR 489.

[5] Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, 81−82 [65] (Gummow and Hayne JJ).

[6] Ibid 83−84, [70−71]; See generally, Nicholas John Holdings Pty Ltd & Ors v ANZ Banking Group Ltd & Ors [1992] VicRp 98; [1992] 2 VR 715, 722−724; Tjiong v Tjiong [2007] NSWSC 216 (23 February 2007) [7]−[13].

[7] Piroshenko v Grojsman & Ors (2010) 27 VR 489, 494 [22].

[8] Castlemaine Tooheys Ltd v South Australia [1986] HCA 58; (1986) 161 CLR 148, 153-154 (Mason CJ) approved by Gleeson CJ in Australian Broadcasting Corporation v Lenah Game Meats (2001) 208 CLR 199, 217−218 [13]; See also Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57; Samsung Electronics Co Ltd v Apple Inc (2011) 217 FCR 238.

[9] Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618, 623 approved by the High Court in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, 82 [65]; see also Samsung Electronics Co Ltd v Apple Inc (2011) 217 FCR 238, 260 [62].

[10] Bradto Pty Ltd v State of Victoria [2006] VSCA 89; (2006) 15 VR 65, 73 [35].

[11] Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, 68 [19].

1. [12] McMahon v McMahon [1979] VicRp 23; [1979] VR 239, 243-244; Goldstraw v Goldstraw [2002] VSC 491 (14 November 2002) [26].

[13] [2017] NSWSC 1283 (22 September 2017) [62]−[70].

[14] [1985] HCA 78; (1985) 160 CLR 583.

[15] [1987] HCA 59; (1987) 164 CLR 137.

[16] Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583, 622.

[17] Jones v Dunkel (1959) 101 CLR 298.

[18] 1st Fleet Pty Ltd v Australian Cooperative Foods Ltd [2006] NSWSC 881 (29 August 2006) [5] (White J), adopted by T Forrest J in Attorney-General v Knight [2014] VSC 549 (16 October 2014) [18].

[19] GW and R Mould Pty Ltd v Mould & Anor; Wakefield v Mould & Anor [2016] VSC 330 (14 June 2016) [48].

[20] Charles v Federal Commissioner of Taxation (Cth) [1954] HCA 16; (1954) 90 CLR 598, 609.

1. [21] Macaura v Northern Assurance Co Ltd [1925] AC 619, 626; Ten Pin Properties Ltd v Bowlarama (NZ) Ltd (Unreported, High Court of New Zealand, Tipping J, 18 December 1989) 3; Helm Corporation Ltd v Latestar Pty Ltd (Unreported, Supreme Court of Victoria, Hayne J, 16 June 1994) 25.

[22] Macaura v Northern Assurance Co Ltd [1925] AC 619, 633.

[23] Bradto Pty Ltd v State of Victoria [2006] VSCA 89; (2006) 15 VR 65, 73 [35]; Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57.