Southage Pty Ltd v Beijing Garden Resort Pty Ltd & Ors [2013] VSC 272

2 Adjoining the Land and contiguous with its southern boundary is the neighbouring property 27 Brunswick Street, Fitzroy ("27 Brunswick Street").

3 On 15 October 1958 Stavros Phillipou and Angeliki Phillipou became registered joint proprietors of 29 Brunswick Street. On 28 May 1962 they also became registered joint proprietors of the neighbouring property at 27 Brunswick Street, Fitzroy. Following the death of Stavros Phillipou, Angeliki Phillipou became the surviving registered proprietor of both 29 Brunswick Street and 27 Brunswick Street.

4 On 18 December 1994 Angeliki Phillipou died. On the death of Angeliki Phillipou, the Second and Sixth Defendants became joint executors and trustees of the Will of their mother, and personal representatives of her estate.

5 There are four caveats in issue lodged in respect of the Land.

6 The first caveat is Caveat No.AJ772956Y (the "First Caveat"), lodged on behalf of the Second Defendant, Steve Phillips. The caveat is dated 30 June 2012, but was registered by the Land Titles Office on 3 October 2012.

7 The interest claimed is a life tenancy. The grounds of the claim are expressed to be as follows:

Granted by Angeliki Phillipou, mother. Occupation and enjoyment during life pursuant to will. Probate has been granted and all debts of the estate were paid at probate at that time on or about 16 December 1996.

8 The address of the caveator is shown as 29 Brunswick Street, Fitzroy.

9 The second caveat is Caveat No.AJ773292U (the "Second Caveat"), lodged on behalf of the Sixth Defendant (who is brother to the Second Defendant), Phillip Phillipou. The Second Caveat is undated, but was registered against the title to 29 Brunswick Street by the Land Titles Office on 3 July 2012.

10 The interest claimed is an estate in fee simple. The grounds of the claim are expressed to be:

Exclusive use and occupation for on or about 40 years, adverse possession.

11 The address of the caveator is shown as 27 Brunswick Street Fitzroy.

12 The third caveat is Caveat No.AJ773291W (the "Third Caveat"), lodged on behalf of the Third, Fourth and Fifth Defendants, who are Ashley Elizabeth Phillips, Kristopher Steve Phillips and Brittany Madison Phillips respectively. The Third Caveat is dated 30 June 2012. It was registered on the title to 29 Brunswick Street by the Land Titles Office on 3 July 2012.

13 The interest claimed is an estate in fee simple. The grounds of the claim are expressed to be:

Pursuant to a trust deed dated 21 November 1996, Stavros Phillipou Family Trust

AND

Will of Angeliki Phillipou, grandmother, probate being granted and debt free on granting probate.

14 The address of the caveator is shown as 29 Brunswick Street, Fitzroy.

15 The fourth caveat is Caveat No.AJ875863H (the "Fourth Caveat"), lodged on behalf of the Seventh Defendant, Srunyu Kristopher John Phillipou. The Fourth Caveat is dated 26 August 2012, but was registered on title to 29 Brunswick Street on 27 August 2012.

16 The interest claimed is an estate in fee simple. The grounds of the claim are expressed to be:

An equitable interest to a claim for adverse possession, exclusive use and occupation.

17 The address of the caveator is shown as 27 Brunswick Street, Fitzroy.

Relationship of the Second to Seventh Defendants

18 The Second and Sixth Defendants, Steve Phillips and Phillip Phillipou, are the sons of the late Stavros Phillipou and Angeliki Phillipou.

19 The Second Defendant is father to the Third Defendant, Ashley Elizabeth Phillips, the Fourth Defendant, Kristopher Steve Phillips and the Fifth Defendant, Brittany Madison Phillips.

20 The Sixth Defendant is father to the Seventh Defendant, Srunyu Kristopher John Phillipou.

21 The First Defendant, Beijing Garden Resort Pty Ltd, is a company incorporated on 13 April 1994. The Second Defendant was appointed a director from 13 April 1994. From 14 November 1996 he became its sole director and remained as such until 27 June 2006. The current sole director and sole secretary of the First Defendant is Tanya Belaj, who was appointed to these roles following the bankruptcy of the Second Defendant.

22 On 17 December 1996, the First Defendant was registered as the sole proprietor of the Land. This occurred pursuant to a transfer of land dated 16 December 1996 which was executed by the Second and Sixth Defendants in their capacity as legal personal representatives of the estate of their mother, Angeliki Phillipou. The consideration expressed in the transfer was $250,000.

23 The Second Defendant claimed that the First Defendant was a trustee of a fixed trust in which his children, the Third, Fourth and Fifth Defendants, were the beneficiaries.

24 The transfer of the Land to the First Defendant occurred in breach of Angeliki Phillipou's will dated 2 July 1992 and the trusts created under that will as later described in these reasons. Nevertheless, no proceeding has been taken to set aside the transfer. Consequently, as from 17 December 1996, the Land ceased to be an asset of the estate.

25 The Plaintiff is in the business of providing mortgage finance to approved borrowers.

26 On 21 May 2010 the First Defendant granted a second mortgage to the Plaintiff over 29 Brunswick Street to secure a loan of $150,000. The borrowing was due to be repaid on 21 May 2011 after one year. The mortgage was registered on 23 July 2010.

27 At the time of taking out the mortgage Tanya Belaj, the director of the First Defendant, swore a statutory declaration on 26 March 2010 which states:

The mortgagor will not before registration of the mortgage sell, agree to sell, offer to sell or give any option to purchase the land, nor further mortgage, charge, encumber, lease or otherwise deal with the land in any way without the prior written consent of the mortgagee

...

There are no charges, including unpaid road charges, rates and land tax due to any person, body corporate or government body in respect of the land or liens, debentures, mortgages, leases, liabilities, or any other matters adversely affecting the land not already disclosed in writing to the mortgagee.

28 In the course of the First Defendant making the application for finance from the Plaintiff, the Plaintiff administered requisitions on title, dated 25 March 2010, on the First Defendant. The requisitions were prepared by Lendlaw, the solicitors acting on behalf the Plaintiff at the time. Relevant requisitions and answers will be later referred to in these reasons.

29 The director of the First Defendant has sworn a statutory declaration confirming that rents have been paid at the rate of $100 per week by the Second Defendant and other occupants. It is alleged by the Plaintiff that this statutory declaration is false as the previous statutory declaration sworn at the time of the taking out of the mortgage confirmed that there were no leases in place.

30 The Plaintiff is the second mortgagee. A first mortgage was granted in respect of the Land situated at 29 Brunswick Street, Fitzroy, in favour of Permanent Trustee Company Limited on 19 September 2006.

31 A proceeding was instituted by the Plaintiff as against the First Defendant in this Court in Proceeding S CI 2011 4576 seeking possession of 29 Brunswick Street. The proceeding was defended by the First Defendant, but was resolved by minutes of consent orders made 30 May 2012.

32 In the consent orders made by Mukhtar AsJ, the registered proprietor agreed to pay the Plaintiff the sum of $189,445.14 on or before 2 July 2012, failing which the Plaintiff would seek to recover possession of 29 Brunswick Street. The First Defendant failed to pay this sum by 2 July 2012, or any money at all. The Plaintiff then applied for a warrant for possession of the Land, which was issued by this Court on 26 July 2012.

33 The caveats in question started to be lodged with the Land Titles Office within a month of the making of the consent orders on 30 May 2012.

34 On 28 July 2000 the Second Defendant and the Sixth Defendant became registered on title to the property at 27 Brunswick Street as the legal personal representatives of the estate of their mother Angeliki Phillipou, having been granted probate of her will.

35 On 31 May 2012, 27 Brunswick Street was transferred to the Seventh Defendant, by the Second and Sixth Defendants. The Seventh Defendant thereafter became, and remains, the sole registered proprietor of 27 Brunswick Street. This was done when he attained the age of 25 years, no doubt to reflect the intention expressed in his grandmother's will (which will be later referred to).

36 I now turn to the various other proceedings which have been issued in this matter.

Applications under section 89A(3) of Transfer of Land Act 1958

37 Three applications were made by the Plaintiff with the Registrar of Titles under s 89A of the Transfer of Land Act 1958 on 25 July 2012 to remove the caveats lodged over 29 Brunswick Street. These applications were respectively AJ815831C, AJ815932E and AJ815933C.

38 After these applications were lodged, pursuant to s 89A(3) the Registrar of Titles advised the Second to Sixth Defendants by letter that notification was required that proceedings were on foot in court of competent jurisdiction to substantiate the claim of the caveator in relation to the Land and the state or interest claimed.

39 As required, the Second Defendant issued proceedings in this Court in Proceeding No. SCI2012/04897 on 27 August 2012 claiming an interest in the Land.

40 No proceedings, however, were issued by the Third, Fourth, Fifth and Sixth Defendants. The Plaintiff wrote to the Registrar of Titles seeking an explanation as to why the caveats lodged in respect of the Third, Fourth, Fifth and Sixth Defendants had not been removed as a result of his application made under s 89A of the Transfer of Land Act 1958. Correspondence ensued culminating in the short letter from the Registrar dated 19 October 2012 in which the Registrar refused to remove the caveats.

41 The Second Defendant, Steve Phillips, is a bankrupt and has been bankrupt since 28 August 2006. The bankruptcy search discloses that the Second Defendant was not only bankrupt, but that his bankruptcy has been extended from time to time. This occurred because he continued to manage a corporation and also because he failed to disclose a liability. His bankruptcy appears to have ended on 13 November 2012.

42 It is claimed by the Plaintiff that the Second Defendant had no legal standing to issue this proceeding on 20 August 2012. The Plaintiff wrote to the Second Defendant on 24 September 2012 and demanded that he remove the caveats within seven days otherwise an application would be made to this Court to have them removed.

43 On 4 October 2012 the Plaintiff wrote to the Prothonotary of the Supreme Court at Melbourne bringing to the Prothonotary's attention the fact that the Second Defendant was bankrupt and that he should not have been permitted to issue Proceeding No.SCI2012/04897.

44 The Second to Sixth Defendants have issued proceedings in the Victorian Civil and Administrative Tribunal ("VCAT") Residential Tenancies List seeking a declaration that they are tenants occupying the premises.

45 Interim orders were made by VCAT declaring the Second to Fifth Defendants as tenants. This application was made ex parte and in the absence of the Plaintiff.

46 The VCAT proceeding is part heard and was due to resume on Wednesday 7 November 2012. An adjournment of the VCAT proceeding was requested by the Second Defendant in order that he may call the director of the First Defendant as a witness. However, the director failed to attend the VCAT proceeding, although she had sworn a statutory declaration.

47 The Plaintiff claims that the VCAT application is inconsistent with the claims that the Second to Fifth Defendants have in respect of their caveats on the Land. The Plaintiff claims that they are not rent paying tenants, but occupants of the premises. The Plaintiff has informed the Court that the Second Defendant was granted an injunction order by VCAT against the Sheriff's Office on 1 November 2012. The Plaintiff claims that the Second Defendant is making every effort to frustrate the execution of the warrant for possession issued out of this Court.

48 On 22 November 2012 possession was obtained by the Sheriff's Office of the Land at 29 Brunswick Street. The Sheriff locked out the occupants, who were at the time the Second Defendant, the Third Defendant, the Fourth Defendant and the Fifth Defendant. At the time of taking possession only the Fourth Defendant was at home. After November 2012 steps were taken to realise the Land by the Sheriff.

49 The Second and Fourth Defendants made complaint as to the conduct of the Sheriff during this period.

50 On 2 November 2012 the Plaintiff commenced the present proceeding for the removal of the four caveats which were lodged in respect of 29 Brunswick Street.

51 Also in November 2012 the Second Defendant lodged an application on behalf of the Sixth and Seventh Defendants for a vesting order under s 60 of the Transfer of Land Act 1958. The vesting order is based on a claim for adverse possession.

The Defendants' interest in the land at 29 Brunswick Street, Fitzroy

52 The interests claimed by the Defendants' in the Land stems from three sources: the Will of Angeliki Phillipou; the Stavros Phillipou Family Trust; and a claim for adverse possession.

53 The claim of an interest in the Land arising the basis of the Will and Family Trust will first be considered, and then the claim of adverse possession will be addressed. As will be seen, none of these sources gives rise to an interest of any of the Defendants in the Land capable of supporting a caveat.

54 Angeliki Phillipou executed a will dated 2 July 1992 (the "Will"). She appointed her sons, the Second and Sixth Defendant, to be the executors and trustees under her will. By Clauses 4, 5, 6 and 7 she made the following devises and bequests:

4. I GIVE DEVICE AND BEQUEATH my dwelling house situate at 27 Brunswick Street, Fitzroy, in the said State, together with the furniture effects and other contents thereof UPON TRUST to permit my son the said PHILLIP PHILLIPOU to have the use, occupation and enjoyment thereof during his life or until my grandson SURANYU PHILLIPOU attains the age of twenty-five years, whichever be the earlier, he paying all rates and taxes and other outgoings thereon and keeping the same in a good an habitable repair, fair wear and tear and damage by fire, lightening, flood and tempest excepted and his keeping of the same insured against fire to the satisfaction of my Trustees, AND I DIRECT that on the death of the said PHILLIP PHILLIPOU or upon my grandson the said SURANYO PHILLIPOU attaining the age of twenty-five years, whichever be the earlier, the said dwelling house and contents shall be transferred to my grandson the said SURANYO PHILLIPOU.

5. I DIRECT that in the event of my grandson the said SURANYU PHILLIPOU predeceasing me then the property known as 27 Brunswick Street, Fitzroy in the said State shall be transferred to my son PHILLIP PHILLIPOU absolutely and beneficially AND I FURTHER DIRECT that if the said PHILLIP PHILLIPOU and the said SURANYU PHILLIPOU predecease me then the property known as 27 Brunswick Street, Fitzroy in the said State shall be transferred to my daughter MARY TANTSIS.

6. I GIVE DEVISE AND BEQUEATH my dwelling house situate at 29 Brunswick Street, Fitzroy in the said State, together with the furniture effects and other contents thereof UPON TRUST to permit my son the said STEVE PHILLIPOU to have the use, occupation and enjoyment thereof during his life or until my grandson KRISTOPHER PHILLIPOU attains the age of twenty-five years, whichever be the earlier, he paying all rates and taxes and other outgoings thereon and keeping the same in a good an habitable repair, fair wear and tear and damage by fire, lightening, flood and tempest excepted and his keeping of the same insured against fire to the satisfaction of my Trustees, AND I DIRECT that on the death of the said STEVE PHILLIPOU or upon my grandson the said KRISTOPHER PHILLIPOU attaining the age of twenty-five years, whichever be the earlier, the said dwelling house and contents shall be transferred to my grandson the said KRISTOPHER PHILLIPOU.

7. I DIRECT that in the event of my grandson the said KRISTOPHER PHILLIPOU predeceasing me then the property known as 27 Brunswick Street, Fitzroy in the said State shall be transferred to my son STEVE PHILLIPOU absolutely and beneficially AND I FURTHER DIRECT that if the said STEVE PHILLIPOU and the said KRISTOPHER PHILLIPOU predecease me then the property known as 29 Brunswick Street, Fitzroy in the said State shall be transferred to my daughter MARY TANTSIS.

55 She made provision for the residue of her estate in Clause 8 of the Will.

56 It was submitted by the Second Defendant that on the basis of the Will he has a present life interest in the Land and that this is sufficient to support his caveat.

57 I do not accept this submission for two reasons. First, at best the Second Defendant may have once had a defeasible life interest in the Land. The life interest was to end upon the grandson of the testatrix, the Fourth Defendant, attaining 25 years.

58 Second, and more significantly, the Land is no longer an asset of the estate created under the Will. It will be recalled that on 17 December 1996 the executors and trustees under the Will transferred the Land to the First Defendant for a consideration expressed in the transfer to be $250,000. Although the Land may have been treated as an asset of the Stavros Phillipou Family Trust, as later referred to, the Land was thereafter held in quite a different capacity to that provided under the Will.

Stavros Phillipou Family Trust Deed of Settlement

59 The Stavros Phillipou Family Trust was created by a Deed of Settlement dated 21 November 1996. This trust was named after the deceased husband of the late Angeliki Phillipou, Stavros Phillipou. The trustee of the trust was the First Defendant.

60 The Schedule to the Trust Deed provided that the specified beneficiaries were the children of Second Defendant. It further provided that the Second Defendant was an "additional member of the class of general beneficiaries." The vesting day provided was 30 June 2075 [sic]. Thus the Third Defendant, and Fourth Defendant, and the Fifth Defendant, all being children of the Second Defendant were the specified beneficiaries. The Second Defendant, Steve Phillips, was an additional member of the class of general beneficiaries under the trust.

61 On 1 July 2005 the Trust Deed was amended to delete the Second Defendant as an additional member. The Second Defendant is not an officeholder or shareholder of the trustee company at the present time. It was submitted by the Plaintiff that the trust was a discretionary trust and not a fixed trust. On the other hand the Second Defendant submitted that it was a fixed trust.

62 In my opinion the trust is a discretionary trust. Jacobs' Laws of Trusts in Australia describes discretionary trusts as being:

... a species of express trust, one where the entitlement of beneficiaries to income, or to corpus, or both, is not immediately ascertainable; rather the beneficiaries are selected from a nominated class by the trustees [...].[1]

63 The Stavros Phillipou Family Trust falls into this category of trust. This is primarily borne out by Clause 6 of the Trust Deed, which reads:

(a) Subject to Clause 10 hereof at any time or times and from time to time before the Vesting Day pay convey or transfer the whole are [sic] any part of the Trust Fund (but not any moneys referred to in sub-clause (5) of this clause) either in addition to or in substitution for any share of income to any one or more beneficiaries for his or their own use and benefit or apply the same to or for the maintenance education advancement or benefit of any one or more beneficiaries or his or their or of the beneficiaries as a whole in such manner as the trustees shall think fit and for that purpose may raise any such sum or sums out of the said capital or borrow any sum or sums in such manner as they shall think fit;

(b) Subject to Clause 10 hereof at any time or times and from time to time pay before the Vesting Day lend any sum to any beneficiary either with or without security and upon such terms and conditions as to repayment and with or without interest as they shall think fit;

(c) Subject to Clause 10 hereof at any time or times and from time to time pay or apply to or for the benefit of any one or more beneficiaries or his or their issue the whole or any part of the capital or income or accrued or accumulate income to which such beneficiary or beneficiaries are either absolutely or contingently entitled or in which he or they have any interest (and notwithstanding that such interest is liable to be defeated or diminished by the exercise of any power or appointment or revocation or by reason of any other matter or circumstance) in such manner and subject of such terms and conditions as they shall think fit or without limiting the generality of the foregoing for the maintenance education advancement or benefit of such beneficiary beneficiaries or issue.

64 These clauses are typical of a discretionary trust and therefore, it can safely be concluded that the Stavros Phillipou Family Trust is a discretionary trust. This has a direct bearing on the nature of the interest held by the potential beneficiaries.

65 A member of the class of possible objects of the benefits of a discretionary trust has no proprietary interest in the trust assets, although the member does have standing to compel the proper administration of the trust. This is so unless there is no other discretionary object.

66 Jacobs' Law of Trusts in Australia, in describing beneficiaries under a discretionary trust, puts the position in the following way:

This class is, in essence, the object of a trust power in the trustee to appoint either or both income or corpus and to do so periodically between members selected from the designated class on each such occasion, but reserving in the trustee a discretion as to the quantum of income or corpus appointed to any particular individual and a discretion to declare the exercise of the power on any such occasion. In such cases, it is difficult to maintain that any particular object of the power has an interest in the trust fund and, indeed, the widespread use of discretionary trusts as a means of avoiding death duties assumed that there would be no such interest for the purposes of revenue legislation. Further, to say that as between all of them the objects enjoy beneficial ownership and therefore may, if all sui juris, invoke the rules in Saunders v Vautier, is to envisage a group interest greater than the aggregate of individual interests by attribution to the whole of a character not possessed in any degree by any of its parts. However, clearly the objects have the right to due administration of the trust, so that the trust is entirely in their interest.[2]

67 To like effect are the observations of Lord Wilberforce in Gartside v Inland Revenue Commissioners,[3] and those of Lord Reid in the same case.[4]

Applications under section 90(3) Transfer of Land Act 1958

68 As noted above, the Plaintiff has made an application to have the Court remove the caveats over 29 Brunswick Street under s 90(3) of the Transfer of Land Act 1958. This section provides that:

Any person who is adversely affected by any [...] caveat may bring proceedings in the court against the caveator for the removal of the caveat and the court may make such order as it thinks fit.

69 In Goldstraw v Goldstraw,[5] Dodds-Streeton J set out a number of principles which apply in relation to s 90(3) applications. Her Honour observed:

Section 90(3) is in the nature of a summary procedure analogous to the determination of interlocutory injunctions. The court's power under s 90(3) is discretionary. In that context, it is recognised that the caveator bears the onus of establishing that there is a serious question to be tried that he or she does have the estate or interest in the land claimed. That is, 'in order to resist successfully the applications for removal of caveats, the caveator's arguments must be directed towards the assertion of an interest in the subject land in the light of relevant principles of property and equity law'. Further, if the caveator does establish the 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.[6]

70 Those principles have been regularly applied in this court and have become established jurisprudence. I will now apply these principles to the caveats in question in this proceeding.

71 For the reasons earlier set out in paragraphs [55] to [58], the Second Defendant has no interest in the Land arising from his mother's will which can support the First Caveat. There is no serious question to be tried in relation to this issue. Accordingly, I will order Caveat No.AJ772956Y be removed.

72 For the same reason, there is no question to be tried in respect of the Third Caveat insofar as it is founded upon the Will of the late Angeliki Phillipou.

73 Further, as the Stavros Phillipou Family Trust is a discretionary trust, insofar as the caveat was founded on the Trust Deed in place for this Trust, there is no serious question to be tried. Accordingly, I will order that Caveat No.AJ773291W be removed.

74 The interest in the Land claimed by the Second and Fourth Caveat is founded upon a claim for adverse possession relating to the rear of 29 Brunswick Street. This Claim must be assessed to determine whether the Court should order the removal of the Caveats.

75 The physical character of the Land is important on the issue of adverse possession. Photographs taken recently depict a fence which surrounds the external boundaries of 29 Brunswick Street and 27 Brunswick Street. Consequently, it is not possible for the public to freely gain access to either property without scaling the fences.

76 Significantly, towards the rear of 29 Brunswick Street, about two-thirds of the way down the property, the Land is blocked by a fence structure. Present photographs of this structure show a somewhat dilapidated wooden paling fence, a remnant brick wall section, and what looks to be a relatively new cyclone wire gate which is locked by a chain and padlock to a portion of the fence structure. The cyclone gate is higher than the remaining fence structure, which looks to be about five feet high. Although the fence structure overall is in a poor state of repair, it presents as a clear impediment to the passage to the balance of the Land shown on the title to the 29 Brunswick Street land to all but the most intrepid. Such passage is further impeded by rubbish, overgrown weeds and foliage, an overhanging lemon tree, what looks to be horizontally laid bamboo poles, and a fence structure or part of a fence structure supporting timber.

77 Of further significance is the fact that the dividing fence between the 27 and 29 Brunswick Street properties has been removed from the area of the fenced rear portion of 29 Brunswick Street. This has the result that the 27 Brunswick Street property appears as an L-shaped piece of land on a Google Earth aerial photograph, and on the plan of survey which has been earlier referred to.

78 The Sixth Defendant swears in his affidavit of 4 March 2013 that "the brick fence and chain wire gate have been securely padlocked since before my mother's death". The Sixth Defendant also swears in his affidavit of 26 November 2012 that

at no time during the past 50 years approximately could any inspection have been made of the property at 29 Brunswick Street without it immediately becoming evident that the property as fenced did not coincide with the title boundaries because one segment of the property had been enclosed so as to make it part of 27 Brunswick Street.

79 The question of whether the Second Caveat should be removed can be easily determined. The sole registered proprietor of 27 Brunswick Street is the Seventh Defendant, Srunyu Kristopher John Phillipou.

80 As such, the Sixth Defendant cannot maintain the Second Caveat because he has no interest in 27 Brunswick Street and therefore cannot claim adverse possession of land in its favour. Accordingly, there is no serious question to be tried on this issue and I will order that Caveat No.AJ773292U be removed.

81 The Fourth Caveat was lodged on behalf of the Seventh Defendant, Srunyu Kristopher John Phillipou, who is the registered proprietor of 27 Brunswick Street. The Seventh Defendant became registered proprietor of 27 Brunswick Street on 31 May 2012. Prior to that date the Seventh Defendant occupied 27 Brunswick Street with the permission and licence of the registered proprietors, the Second Defendant and the Sixth Defendant, as the legal personal representatives of the estate of the late Angeliki Phillipou.

82 As set out above, the Second and Sixth Defendant became the registered proprietors of 27 Brunswick Street on 28 July 2000 after they obtained probate of their mother's will. Prior to 28 July 2000, 27 Brunswick Street was registered in the sole name of Angeliki Phillipou. Angeliki Phillipou was also the sole registered proprietor of 29 Brunswick Street from 10 September 1965.

83 Until her death on 18 December 1994, Angeliki Phillipou used the rear of 29 Brunswick Street for fruit trees, and a vegetable and herb garden, while residing at 27 Brunswick Street. Fencing was installed at the back of 29 Brunswick Street in order to keep out boarders and tenants who occupied 29 Brunswick Street. Angeliki Phillipou could not, therefore, have adversely possessed any part of 29 Brunswick Street during her life as she was the owner of both properties.

84 After the death of Angeliki Phillipou, the Second and Sixth Defendants were required to administer their mother's estate in accordance with the terms of her will dated 2 July 1992. That is, the Sixth Defendant had the right to use, occupy and enjoy 27 Brunswick Street during his life or until his son the Seventh Defendant had obtained the age of 25 years. The Second Defendant also had the right to use, occupy and enjoy 29 Brunswick Street during his life or until his son the Fourth Defendant attained the age of 25 years.

85 As joint executors and trustees of their mother's estate, and subsequently as joint proprietors of 27 Brunswick Street from 28 July 2000, and of 29 Brunswick Street on 21 November 1996, the Second and Sixth Defendant could not have adversely possessed one property as against the other. This was, in effect, conceded by counsel for the Sixth and Seventh Defendants in submissions.

86 The common ownership arguably ceased on 17 December 1996 when the Second and Sixth Defendants transferred 29 Brunswick Street to the First Defendant and the property then ceased to be an asset of the estate.

Relevant Legal Principles relating to Adverse Possession

87 The relevant legal principles relating to the extinguishment of title by adverse possession were considered by the Victorian Court of Appeal in Whittlesea City Council v Abbatangelo ("Whittlesea").[7]

88 In this case, the principles applicable to an adverse possession claim are considered and listed in an exhaustive analysis.[8] It is necessary to focus on only one of those principles for present purposes. The Court in Whittlesea made the following observation:

Section 8 of the Limitation of Actions Act 1958 provides that no action shall be brought by any person to recover any land after the expiration of 15 years from the date on which the right of action accrued. Section 18 provides that at the expiration of that period the person's title to the land shall be extinguished. As to when the right of action accrues, s 9(1) refers to the date upon which the person whose title stands to be extinguished 'has ... been dispossessed or discontinued his possession', whilst s 14(1) provides that '[n]o right of action to recover land shall be deemed to accrue unless the land is in the possession of some person in whose favour the period of limitation can run [...]'.[9]

The reference to 'adverse possession' under s 14(1) of the Act is to possession by a person in whose favour time can run and not to the nature of the possession. The question is simply whether the putative adverse possessor has dispossessed the paper owner by going into possession of the land for the requisite period without the consent of the owner, with the word 'possession' being taken to have its ordinary meaning.[10]

90 To this I would add the observations of Tamberlin J in Bridges v Bridges,[11] who in summarising the principles relating to adverse possession said as follows:

The concept of adverse possession in the Act is to possession by a person in whose favour time can run and not to the nature of the possession. The question is whether the claimant adverse possessor has dispossessed the paper owner by having possession without the consent of the owner.[12]

[Emphasis added]

91 In other words, time cannot begin to run in favour of the possessor where possession is with the documentary owner's consent or permission.

92 In the context of family relationships between the possessor and the documentary owner, an inference may be drawn to the effect that the possession is with the permission of the documentary owner and is not therefore adverse.

93 It is, however, clear that each case in this area must turn on its own facts: see Radonich v Radonich,[13] Richardson v Greentree,[14] Tunley v James[15] and Hughes v Griffin.[16]

94 In this case, the evidence substantiates a clear finding of consent. The following facts support this conclusion. On 17 December 1996, the First Defendant became the sole proprietor of 29 Brunswick Street. One of the directors was the Second Defendant. On 28 August 2006, the Second Defendant became bankrupt. Tanya Belaj became the sole director and sole secretary of the First Defendant on 9 February 2007.

95 Ms Belaj swears in her affidavit of 4 March 2013 that she first visited the property in about mid 2006. She also swears that the last time she visited the property was in the second half of November 2012. She says that on both occasions, and at all times between those two dates, there was a fence erected between the title boundaries and which, in effect, enclosed a portion of the backyard and made that portion part of the backyard or 27 Brunswick Street. It would have been impossible for a person to have inspected the property in February 2010 and not have seen that fence, she says.

96 On 26 March 2010 Tanya Belaj declared a Statutory Declaration in support of the application for a proposed second mortgage from the First Defendant over the Land at 29 Brunswick Street in favour of the Plaintiff. At Paragraph 6 of that Statutory Declaration Tanya Belaj said:

There is no matter known to the mortgagor about the land which could adversely affect the security of the mortgage or which affects or restricts its powers to mortgage the land that it has not previously disclosed to the mortgagee.

97 In Paragraph 9 of that statutory declaration Tanya Belaj said:

I am aware that the mortgagee is relying on the truth and correctness both of the matters set out in this declaration and all other information given by the mortgagor in reply to requisitions and other enquiries in respect of the land, and that it is on this basis that all such information given by the mortgagor and myself that the mortgagee has agreed to provide certain financial accommodation to the mortgagor in its own capacity and as trustee of the Stavros Phillipou Family Trust.

98 Requisitions on title were provided by the solicitors acting on behalf of the proposed mortgagee to the First Defendant. In Paragraph 1(2) of the requisitions the following was requested:

Is the mortgagor aware of any discrepancy between the property occupied by the mortgagor and the property as shown on the title? If so particulars must be supplied.

99 In Requisition 2(1) the following was requested:

Who is in possession of the property? If not the mortgagor, full particulars of the following matters are required.

100 Ms Belaj, in her capacity as the sole director and company secretary of the First Defendant, signed the answers to the mortgagee's requisitions in a letter dated 21 May 2010. The answer she provided to Question 1(2) was "NO". The answer provided to Question 2(1) in the requisitions was "(a) Beijing Gardens Resort Pty Ltd". Although in her affidavit Ms Belaj said that she misinterpreted Requisition 2(1), she does not say that she misinterpreted Requisition 1(2). Rather, she swears that:

At the time of swearing the statutory declaration on 26 March 2010 there were no caveats over the land other than the first mortgagee that was known to the plaintiff, and no other matters adversely affecting the land was known to me. I was unaware of any prospective adverse possession claim over part of the property, hence my declaration was true based on my knowledge and belief.

101 However, at the time Ms Belaj well knew of the existence of the fence which bisected the property at 29 Brunswick Street which, in effect, enclosed a portion of the backyard of that property and made it part of the backyard of 27 Brunswick Street. She knew this to be the case as from about mid 2006 and continuously until the second half of November 2012. I accept that there were no other matters adversely affecting the Land that was known to her.

102 However, in the light of her knowledge of the physical division of the Land at 29 Brunswick Street arising from the positioning of the fence, the statement quoted above from her affidavit could only have been true if the occupation of the rear of 29 Brunswick Street was not adverse to the First Defendant. In other words, the occupation was with the consent of the First Defendant.

103 Support for a finding of consent on the part of the First Defendant and its predecessors in title is also derived from the following facts. First, at no time has the First Defendant, in spite of its full knowledge of the situation, ever taken any step to remove the fence or any part of it which provided the physical barrier to gain access to the rear of 29 Brunswick Street.

104 Second, the history of occupation of the 27 and 29 Brunswick Street properties points to the occupation being undertaken pursuant to a consensual family arrangement. Statutory declarations filed in support of the application for a vesting order sought in favour of 27 Brunswick Street clearly evidence this as being the case. For example, the statutory declaration of the Second Defendant says as follows:

1. On/or about 1967, I moved into 27 Brunswick St Fitzroy, with Mrs Angelique Phillipou ("Mother"), Mr Phillip Phillipou ("Brother"), and Ms Mary Phillipou ("Sister"), the age of approximately 18, and resided there until I was 21. At this point in time my father was deceased;
2. No. 29 and 27 Brunswick St Fitzroy ("Properties"), both properties were owned by my parents since on/or about the 1960s and were both used as boarding houses; and
3. My parents re-aligned the boundaries and fenced off the rear of both properties thereby denying access to this area of the properties to all tenants and/or occupants, and/or Boarders, thus retaining exclusive access entering, via the property known as No. 27; and
4. This fenced off area of the Properties was used by my Parents as a vegetable and spice garden, to grow those herbs and spices not available at the time on the open market, which were used by my parents in the family business being cafe's located at No. 64 Brunswick Street, and 115 Gertrude Street, Fitzroy, Melbourne, Victoria (Cafe's), were [sic] the Family resided; and
5. On/or about 1967, the Cafe's, plus other properties were compulsory acquired by the Housing Commission, hence my family were evicted by force, from the properties, and had to re-locate to the property known as No. 27, and the property known as No. 29 remained as a boarding house until the early 90s; and
6. The re-located boundary lines created by my Parents on/or about the 1960's were retained by my Mother who with my Brother resided at the property known as No. 27, until my Mother's death, and my Brother is still in residence and occupation of the said property, with his Son Mr Srunyu Christopher John Phillipou ("Nephew"), now twenty five years old and has resided on the property since birth, and both have had exclusive use and access to the rear of the property known as No. 29 since on/or about 1967.
7. My Brother and his Son have had exclusive use plus procession [sic] since on/or about 1967. Furthermore pursuant to my Mothers Will my Brother was granted, use, occupation and enjoyment thereof during his life, "Life Estate and/or Life Tenancy", and ownership of the property known as No. 27 transfers to my Nephew on his twenty fifth birthday; ...

105 Supporting statutory declarations provided in the vesting order application are to the same effect, namely, those of the Sixth Defendant, Johanna Bargess, Moyse Sabricolis, and Vinnie Galea. There is no evidence of any opposition being advanced by the First Defendant to the vesting order application.

106 The Second Defendant describes in his affidavit an incident which occurred on 25 January 2012 when the Plaintiff's agent entered the 29 Brunswick Street property and knocked down the whole or part of the chain wire fence at the rear of the land, and snipped the vegetation to alter the appearance, as he put it, without authority or consent to alter the status of the property, and did so in an attempt to reverse that which had existed for some 60 years, for their own personal benefit and gain. The Second Defendant says:

My brother and I reinstated the security fencing unlawfully knocked down by the contractors. I and my brother reinstated the fence that afternoon to maintain exclusivity as to access.

107 He makes a strident complaint about the conduct of the Plaintiff's agents in this respect. He describes their conduct as:

Harassment, improperly and vindictive conduct to the prejudice and compromise of my nephew and brother's lawful rights.

108 It will be recalled that the Second Defendant was the sole director of the First Defendant until 27 June 2006. He was also company secretary from 13 April 1994 until 5 August 2006. The Sixth Defendant was the company secretary between 2006 to 2010. The Second and Sixth Defendants both held 100 shares in each company for a substantial period of time during which they were the majority shareholders. From this conduct I infer that both the Sixth Defendant, for the period that he was a secretary of the First Defendant, and the Second Defendant, throughout his directorship of the company, in their capacities as such, actively consented to the maintenance of the fence line at the rear of 29 Brunswick Street and for the use of the land cut off by that fence by the occupants of 27 Brunswick Street.

109 Following the cessation of the directorship of the Second Defendant the status quo remained and nothing changed, including the ongoing consent of the First Defendant to the family arrangement which had been in place for many years. This consent continued following the appointment of Ms Belaj as the sole director of the company on 9 February 2007.

110 Since that time, in spite of the presence of the fence line being well known to Ms Belaj, the company took no step to remove it, but rather permitted the fence line to remain in place with full knowledge of the position. The family arrangement concerning the land at the rear of 29 Brunswick Street was thereby maintained.

111 The First Defendant is the trustee of the Stavros Phillipou Family Trust. It was in this capacity that the First Defendant entered into a deed of covenant and indemnity with the Plaintiff in support of the mortgage loan. The deed was also executed by the Second Defendant, being the specified beneficiary under the trust, who consented to the deed of covenant and indemnity. It was also executed by Sixth Defendant who gave his consent as the guardian and appointor under the trust. It will be noted that the Second and Sixth Defendants also administered their mother's estate together, which included the properties at 27 and 29 Brunswick Street.

112 It was in this capacity that they both became registered as the proprietors of 29 Brunswick Street on 21 November 1996, and the registered proprietors of 27 Brunswick Street on 28 July 2000. During their administration of the estate they maintained the boundary between the two properties in accordance with the delineation established by the fence maintained by their mother.

113 Both properties have been occupied by members of the family from time to time since the death of Angeliki Phillipou and indeed prior to that time, as indicated by the statutory declarations filed in support of the vesting orders.

114 The facts of this case point irresistibly to the conclusion that the documentary owner of 29 Brunswick Street, the First Defendant, consented to the occupation at the rear of the property by the occupants of 27 Brunswick Street pursuant to a family arrangement between the two families of the Second Defendant and his brother the Sixth Defendant. Accordingly, the Seventh Defendant has no interest in 29 Brunswick Street on the basis of adverse possession.

115 It follows that there is no serious question to be tried as to whether or not the Seventh Defendant has a caveatable interest in respect of the rear portion of the land at 29 Brunswick Street. Accordingly, I will order that the Fourth Caveat, No.AJ875863H, be removed.

1. The Registrar of Titles is ordered pursuant to section 90(3) of the Transfer of Land Act 1958 to remove Caveat AJ772956Y from the land in Volume 8215 Folio 206.
2. The Registrar of Titles is ordered pursuant to section 90(3) of the Transfer of Land Act 1958 to remove Caveat AJ773292U from the land in Volume 8215 Folio 206.
3. The Registrar of Titles is ordered pursuant to section 90(3) of the Transfer of Land Act 1958 to remove Caveat AJ773291W from the land in Volume 8215 Folio 206.
4. The Registrar of Titles is ordered pursuant to section 90(3) of the Transfer of Land Act 1958 to remove Caveat AJ875863H from the land in Volume 8215 Folio 206.
5. Liberty is granted to the parties to make any application for costs upon reasonable notice to all other parties.

[1] JD Heydon and MJ Leeming, Jacobs' Law of Trusts in Australia (LexisNexis Butterworths, 2006), [314].

[2] JD Heydon and MJ Leeming, Jacobs' Law of Trusts in Australia (LexisNexis Butterworths, 2006), [2315] (citations omitted).

[3] [1967] UKHL 6; (1968) AC 553, 617-8.

[5] (2002) VSC 491.

[7] (2009) 259 ALR 56; [2009] VSCA 188.

[10] Ibid [6(a)] (emphasis added) (citations omitted).

[11] (2010) NSWSC 1287.

[13] [1999] WASC 165.

[14] (Unreported) NSWSC, December 1997.

[16] (1969) 1 WLR 23 CA.