Plaintiff v First Defendant Second Defendant

Supreme Court of Victoria|2011-05-05|Before: ROBSON J

PROPERTY - Transfer of Land Act 1958 - application to remove caveat - constructive trust - whether caveatable interest - whether caveat defective - whether caveator met onus of establishing serious claim to be tried - balance of convenience - caveat removed on conditions.

2 Mrs Young's caveat is dated 13 January 2011. The estate or interest claimed is "an estate in fee simple". The grounds of the claim are "whereby the registered proprietor holds his/her interest as trustee for the caveator pursuant to a constructive trust".

3 The application to remove the caveat is made under s 90(3) of the Transfer of Land Act. That provides:

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

4 Mr Young's application is supported by his affidavit of 24 April. He deposes that Mrs Young and he were in a de facto relationship from 1985 to 2002. He says that following their separation in 2002, they settled the financial matters between them pursuant to a deed of agreement and release. That document is dated 6 January 2003.

5 Mr Young says he recommenced his relationship with Mrs Young a short time after executing the deed of agreement and release, and that he and Mrs Young were subsequently married in Perth, Western Australia, on 6 June 2003. He says they separated on 25 December 2008 and have lived separately and apart ever since.

6 Mr Young says that on 13 August 2009, he purchased the property at 9 Sheringham Drive, Werribee for $260,000. He says that in order to pay the deposit for the purchase of the property, he borrowed $26,000 from his parents. He says the loan amount was paid to him by way of a cash payment of $6,000 on 23 February 2009 and two electronic transfers to his Bankwest account on 4 May 2009 of $5,000 and $15,000. He exhibits the relevant Bankwest statement. It demonstrates that by 25 April 2009, the $6,000 had been spent as the balance of the account stood at $8.92 on 25 April 2009.

7 He says he obtained a loan from Bankwest of $251,420 to pay for the balance of the purchase price for the property.

8 He says that on 22 January 2011, he entered into a contract to sell the property for $330,000 with Skye Roxanne Crouch. He says settlement was due on 26 March 2011.

9 He says that on 19 January 2011, Mrs Young lodged the caveat previously referred to on the Certificate of Title to the property.

10 On 10 February 2011, his lawyers wrote to Mrs Young advising her, amongst other things, that an application may be made to the Supreme Court of Victoria for the removal of the caveat and suggested that she obtain legal advice.

11 Mrs Young retained Julienne Penny & Associates, who, by a letter dated 21 February 2011, advised Mr Young's solicitors that they were acting on behalf of Mrs Young.

12 On 22 February 2011, Mr Young's lawyers advised Julienne Penny & Associates that if they did not receive confirmation from Mrs Young's lawyers that the caveat had been removed by close of business on 25 February 2011, they were instructed to issue proceedings to have the caveat removed without further notice, and they also requested Mrs Young's solicitors to advise as to whether they had instructions to accept service.

13 On 23 February 2011, Mrs Young's solicitors informed Mr Young's solicitors that Mrs Young did not agree to withdraw the caveat and Mrs Young's solicitors advised they did not have instructions to accept service of documents related to the caveat and any such documents should be served personally by Mrs Young.

14 Mr Young says that on 25 March 2011, his lawyers spoke to Sargeants Conveyancing acting on behalf of Ms Crouch and requested that the settlement of the contract of sale dated 22 January 2011 be delayed by a period of two weeks to enable further time to resolve the outstanding issues in relation to distribution of the sale proceeds. Mr Young says that the purchaser agreed to the delay and settlement was to occur on 8 April 2011. He says a further extension has been sought from the purchaser, but as at the date of swearing his affidavit, no extension had been granted.

15 Mrs Young relies on an affidavit of 25 April 2011. She says that Mr Young and she were in a relationship from 1986 until December 2008. She says that in December 2002, they separated for approximately three months when she fled the family home with their children due to extreme domestic violence perpetrated by Mr Young. She says they reconciled in mid December 2002 when she returned to the family home.

16 She says that on 6 January 2003, she signed a deed and release without legal advice and under duress and threat of violence from Mr Young. She says the deed resulted in the removal of her name from the property title of the family home situated at 3 Rosehill Court, Attwell, Western Australia.

17 Mrs Young says that she and Mr Young were married on 6 June 2003, but separated on 26 December 2008 and have lived separately and apart ever since.

18 She says that on separation, Mr Young left the family's rented home without informing herself or any of the three children. She says he removed property and assets of the marriage, including a Harley Davidson motorcycle and $30,500 cash. She says that she and the children were informed approximately two weeks later that Mr Young had relocated from Western Australia to Victoria.

19 Mrs Young deposes that on 13 May 2009, Mr Young paid $25,500 as a deposit on the Werribee property. She says that the funds used to pay the deposit were obtained from the sale of assets of the marriage. She exhibits the bank statement which is annotated referring to the sale of the Harley and the provision of money loaned by Mr Young's parents. She says the annexure shows that the funds were obtained from the sale of the Harley Davidson motorcycle.

20 The statement shows that on 4 May 2009, the sums of $5,000 and $15,000 were deposited to the account. As indicated above, the earlier deposit of $6,000 had been spent. Further, the statement shows on 6 May 2009, $15,000 was deposited from the sale of the Harley motorcycle. After the deposit from the sale of the motorcycle and the withdrawal of $9.95, a balance of $35,666.03 remained in the account. Further withdrawals from the account are recorded of $28.70 and $302 on 7 May 2009. Further, a credit of $900 was made on 12 May 2009. On 12 May 2009, the account stood at $36,235.33.

21 On 13 May 2009, the sum of $25,500 was withdrawn from the account as the deposit on the purchase of the property at Werribee, including a bank cheque fee of $10, leaving a balance in the account of $10,725.33. Mr Young concedes that on those transactions at least the difference between $15,000 and $10,725.33 being $4,275, came from the proceeds of the sale of the Harley Davidson and was used towards the deposit.

22 Mrs Young deposes that on 9 January 2011, she lodged a caveat and at that stage she was unaware of the property being listed for sale.

23 She says that on 14 February 2011 she received correspondence from Mr Young's lawyer advising her that Mr Young had sold the property and requesting that she answer on what grounds she had lodged the caveat.

24 On 2 March 2011, Mr Young's solicitors proposed that all proceeds from the sale of the property be held in their trust account until such time as a family law property settlement was agreed upon by both parties on the basis that she remove the caveat from the property to allow the sale to proceed.

25 She says that on 9 March 2011, her solicitor wrote stating that the undertaking to hold all proceeds from the sale in trust if she removed the caveat was acceptable, provided Mr Young would not further encumber the property from this date until when the proceeds of the sale became available.

26 Mrs Young says that Mr Young's lawyers then informed her that a loan agreement had been entered into by Mr Young's parents dated 11 March 2011. She says Mr Young is seeking to have this loan agreement of $26,000 paid from the proceeds of the sale of the property. Mrs Young says that the loan agreement entered into by Mr Young and his parents was signed two months after she lodged the caveat, and only after it was proposed by Mr Young's solicitors that the proceeds of the sale be held in trust once all encumbrances were disbursed.

27 Mrs Young says she strongly disputes the validity of this loan and believes it is an attempt to deceive the Court and diminish any assets Mr Young would otherwise declare as part of a Family Court property settlement.

28 She says that on 15 March 2011, Mr Young's parents lodged a caveat over the property claiming an interest as chargee.

29 She says that by letter dated 23 March 2011, her solicitors advised Mr Young's solicitors that she continued to dispute the validity of the loan from Mr Young's parents and that she was willing to remove the caveat if the proceeds of the sale of the Werribee property were used to repay the amount owing on the mortgage to Bankwest, and amounts owing in relation to conveyancing, advertising and commission fees owed to Sargeant's Conveyancing and Property Transfer Specialists and First National Real Estate at Westwood.

30 She says that on Monday 18 April 2011, at 8.30pm, she was served with a summons at her residential address in Perth requiring her to attend the Supreme Court of Victoria the next morning on Tuesday 19 April 2011 at 10.30am. The matter was adjourned to 4 May 2011.

31 Mrs Young says that, through her solicitors, she has offered options for Mr Young to negotiate a fair and proper property settlement or to have proceeds of the sale held in trust until such time as an agreement could be reached between them. She says that Mr Young has chosen not to accept these options, although they would have resulted in the caveat being removed and costly Court action being avoided.

32 Mrs Young says that she has lodged an application in the Family Court of Western Australia seeking final and interim orders for financial and property settlement of the marriage. She produced in Court the application dated 20 April 2011. The application seeks, amongst other things, an order from the Family Court to prevent the sale of the property or alternatively restrain Mr Young from disposing of the proceeds of sale.

33 Mrs Young says that she believes that she has lodged the caveat legally as a means to protect her financial interest in the property as the wife of Mr Young pending a fair and proper property settlement. She says that if the caveat is removed, there is a high risk that the plaintiff will dispose of the proceeds of the sale of the property in an effort to avoid a financial settlement through the Family Court of Western Australia.

34 Mr Young filed a further affidavit dated 4 May 2011 responding to Mrs Young's affidavit of 27 April 2011. He denies Mrs Young's allegation of domestic violence allegedly perpetrated by him. He also denies the allegations of duress and other violence from him.

35 He says that following separation, he took "my Harley Davidson" motorbike worth approximately $15,000, some tools which had been left to him in his father's Will, a car trailer worth approximately $1,000 and funds of approximately $30,000. He says he transferred the Commodore motor vehicle to Mrs Young's name, which was worth approximately $18,000 and all of the household furniture and chattels were retained by Mrs Young. He says he believes the household furniture and chattels were worth approximately $30,000. He says he transferred the Ford Laser motor vehicle worth approximately $3,000 into their daughter, Emily's, name.

36 I should note at this point that Mr Young did not deny the allegation made by Mrs Young that "he removed property and assets of the marriage including a Harley Davidson motorcycle and $30,000 cash" without informing her or any of her three children.

37 Mr Young says that after separation, he was not contacted by Mrs Young in relation to negotiating a financial settlement. He says that he therefore assumed that she was happy with the distribution "as was agreed between us." Although he referred to it being agreed between them, his counsel conceded that in fact there was no agreement, but rather, he merely took the assets and understood there was no complaint about doing so.

38 Mr Young says that he heard nothing from Mrs Young concerning the distribution of "our assets" until Mrs Young lodged the caveat in January this year.

39 Mr Young says that since acquiring the Werribee property in August 2009, he has spent considerable time and effort renovating the property. He estimates that he spent approximately 15 hours each week working on the property. He says that he did all the tiling, painting, fitting taps and lights, fixed and rehinged doors and worked on the garden. He denies that Mrs Young has a caveatable interest in the property as claimed.

40 Mr Young contends that the caveat lodged is not a proper caveat and is defective. Section 89(1) provides that:

Any person claiming any estate or interest in land under any unregistered instrument or dealing or by devolution in law or otherwise or his agent may lodge with the Registrar a caveat in an appropriate approved form forbidding [etc]

41 The approved form provides for the caveator to identify the estate or interest claimed and the grounds of the claim. In Cwalinski v Cwalinski[1] Burbury CJ of the Supreme Court of Tasmania dealt with an application to remove a caveat that claimed "an estate or interest by virtue of ₤700 provided by me towards the purchase" of the land. He held that the caveat was defective and should be removed as it did not particularise the estate or interest claimed by the caveator. In this case, Mrs Young has claimed an interest in fee simple. On its proper construction, the caveat recognises that the interest claimed in fee simple is an equitable interest as the grounds refer to a constructive trust which in the circumstances involves an equitable propriety interest.

42 The grounds of the caveat rely on a constructive trust. As discussed below, a constructive trust is an accepted ground for supporting a claim to a caveatable interest. I reject the submission that the caveat is defective.

HAS MRS YOUNG ESTABLISHED A SERIOUS QUESTION TO BE TRIED?

43 Secondly, Mr Young contends that Mrs Young has not satisfied the onus on her to sustain the caveat. It is well established that s 90(3) is in the nature of a summary procedure analogous to the determination of interlocutory injunctions.[2] The Court's power under s 90(3) is discretionary. The caveator bears the onus of establishing that there is a serious question to be tried, that is, that she has the estate or interest in the land claimed.[3]

44 The caveatable interest claimed in this case is "an estate in fee simple" and the grounds of the claim are "whereby the registered proprietor holds his/her interest as trustee for the caveator pursuant to a constructive trust".

45 In McMahon v McMahon,[4] Marks J held that an interest based on a constructive trust can constitute an estate or interest claimed under a caveat.[5] Where, as here, Mrs Young claims that moneys of her and her husband which she has an interest in were used to acquire the property, then the registered proprietor holds his interest in the land subject to a constructive trust in favour of the claimant. The nature and extent of the trust will depend on the equities of the situation. In Baumgartner v Baumgartner,[6] the High Court of Australia held that where a claimant has made an indirect contribution to the purchase price of the property to which another person takes title, a constructive trust in favour of the claimant arises.

46 Mr Young relies on the authority of Goldstraw v Goldstraw[7] supported by Bell v Graham[8] to support the contention that the relationship of a marriage alone does not create a caveatable interest pursuant to a constructive trust. Further, it was held by Kellam J in Bell v Graham that the right to seek an order conferring interest in land under s 79 or other provisions of the Family Law Act:

"... does not give a party to a marriage a caveatable interest in land until such time as the Family Court makes an order in respect of their land."

47 I accept that the mere fact that Mrs Young has made an application to the Family Court seeking division of the proceeds from the sale of the property does not give her a caveatable interest under the Transfer of Land Act over the property.

48 On the other hand, the use of moneys in which Mrs Young has an interest to acquire the property does give rise to an arguable caveatable interest in the property on the basis of a constructive trust as discussed above.

49 In Mr Young's affidavit of 4 May 2011, he refers to the assets that he and his wife had at the time he left on 26 December 2008 as "our assets". I am satisfied, therefore, that Mrs Young has established an arguable case to support the interest that she claims in the property under the caveat. She has an arguable case that moneys she has an interest in were used to purchase the property and that accordingly Mr Young holds his interest subject to a constructive trust in her favour.

50 Further, if the caveator does establish a serious question to be tried in relation to the estate or interest claimed, the weight of authority indicates that the caveator must further establish that the balance of convenience favours the maintenance of the caveat until trial.[9] Mr Young contends that if, contrary to his primary position, Mrs Young has not satisfied the onus on her to sustain the caveat, she has not established on the balance of convenience that the caveat should be maintained until the trial of her claim.

51 As indicated in Goldstraw v Goldstraw,[10] the caveator must establish that the balance of convenience favours the maintenance of the caveat until trial. In my view, the balance of convenience lies in the settlement of the sale being allowed to proceed.

52 In my view, the proper course is for the caveat to be removed on condition that if the settlement of the sale to the purchaser proceeds that the proceeds from the settlement of the sale after the payment of all moneys due to Bankwest and amounts owing for conveyancing, advertising and commission to Sargeant's Conveyancing and Property Transfers Specialists and First National Real Estate, Westwood, be held in the trust account of the solicitors for Mr Young pending the hearing and determination of the Family Court application dated 28 April 2011 filed by Mrs Young against Mr Young or further order.

53 I take into account on the question of costs that Mrs Young offered this position to Mr Young to avoid going to court. He declined the offer.

(1) The plaintiff by his solicitors, Schembri & Co Lawyers, forthwith prepare a withdrawal of caveat no AH735174J and present it to the first defendant

(2) The first defendant forthwith execute the said withdrawal of caveat no AH735174J and forthwith deliver the said executed withdrawal of caveat to the solicitors for the plaintiff ;

(3) The solicitors for the plaintiff hold the said withdrawal of caveat in escrow pending the settlement of the contract for the sale of the property situated and known as 9 Sheringham Drive, Werribee in the State of Victoria and being the land more particularly describe in certificate of title volume 09169 folio 960 between the plaintiff and Skye Roxanne Crouch and on settlement of the said contract deliver the said withdrawal to the purchaser or her agents but otherwise not lodge the withdrawal with the Registrar of Titles;

(4) The plaintiff cause to be lodged in the trust account of his solicitors the proceeds of settlement of the said contract of sale save for all moneys due to the first mortgagee, Bankwest, and the amounts owing for conveyancing, advertising and commission to Sargeant's Conveyancing and Property Transfers Specialists and First National Real Estate, Westwood;

(5) The plaintiff's said solicitors shall hold and retain the said moneys pending the hearing and determination of the Family Court application dated 28 April 2011 filed by the first defendant against the plaintiff or further order of this court;

(6) Liberty to apply be reserved on 24 hours notice to the other party; and

(7) The plaintiff pay the costs of the first defendant of this application including the costs and expenses of her travelling from Perth to Melbourne and from Melbourne to Perth for the purpose of this hearing, such costs to be taxed, unless agreed.

[2] Eng Mee Yong v Letchumanan [1980] AC 331.

[3] Goldstraw v Goldstraw [2002] VSC 491 per Dodds-Streeton J; Re Piles Caveat [1981] Qd R 81; Lewenberg and Pryles v Direct Acceptance Corporation [1981] VicRp 36; [1981] VR 344 at 347.

[5] See also Cwalinski v Cwalinski [1958] Tas SR 56; Taddeo v Catalano (1975) 11 SASR 492; Goldstraw v Goldstraw [2002] VSC 491 at [26] and Bell v Graham [2000] VSC 142 at [18] per Kellam J.

[9] Goldstraw v Goldstraw [2002] VSC 491 at [30] per Dodds-Streeton J; Eng Mee Yong v Letchumanan [1980] AC 331.

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