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[2013] NSWSC 1491
Supreme Court of NSW
2013-09-30
Slattery J
Original judgment source is linked above.
Judgment 1The Plaintiff, Steven Stojanovski, applies in the Court's Duty List to extend two caveats. In the alternative he seeks an injunction restraining the defendant, Angelina Stojanovski, from dealing with two parcels of land. The defendant opposes the extension of the caveat and the grant of an injunction. 2The present application is only part of a matter which already has a complicated procedural history. Only a small amount of that history needs to be recounted in order to decide the present application. Almost all of the parties to these proceedings are members of the one family. Without any disrespect to any family member, these reasons will therefore use their first names.
The Stojanovski Family - two sons and four properties 3The defendant, Angelina, is the sister-in-law of the plaintiff, Steven. Angelina is married to Steven's brother Robert. Both Steven and Robert are children of the late Nada Stojanovski, who died on 20 January 2006, leaving a will dated 3 January 2006. Nada's will has regrettably generated much litigation. Nada appointed her brother in law, Mr Jordan Stojanovski, as her executor and trustee and divided her substantial real estate between her two sons. Nada gave her eldest son, Steven, her interests in a property in George Street, Mortdale (the George property) and another in Jersey Avenue, Mortdale (the Jersey property). She gave to her younger son, Robert, her interest in a property in Breakwell Street, Mortdale (the Breakwell property) and another property in Kemp Street, Mortdale (the Kemp property). The will anticipated that there might be marital difficulties between Robert and his wife Angelina and between Steven and his wife Jovanka. That has turned out to be prescient. 4Nada's will records an understanding between Robert and Steven which became the source of the subsequent litigation. The gift to Steven of the George property was straightforward. The deceased owned the whole of the George property and it appears to have been administered by Jordan and transferred to Steven. 5But the will also provided for a gift to Steven of the whole of the Jersey property, which gift was contingent upon Robert's cooperation. The Jersey property was owned by Robert, Steven and Nada as joint tenants at Nada death. When she gave the Breakwell and Kemp properties to Robert, she observed in her will that Robert would transfer his share in the Jersey property to Steven, so that the result of her death will be that Steven would inherit the whole of that property by survivorship. 6Nada's will contains quite strong internal evidence pointing to an agreement made between herself, Robert and Steven, just before she made her will. When dealing with the subject matter of the gift to her eldest son Steven, Nada says in her will of the Jersey property:- "[this property is currently under three (3) names, naming myself Nada Stojanovski, my son Robert Stojanovski and my other son Steven Stojanovski]. In line with my son Robert Stojanovski is to transfer his share in this property to his brother Steven Stojanovski." In an affidavit filed in the related proceedings before Pembroke J (Exhibit 1 - paragraph 52), Robert explains that the intention that emerged from a family conference between Nada, Robert and Steven before Nada's death was that "I (Steven) would have Jersey Avenue, being a property that I could subdivide and that I would also receive George St". As will be seen, findings in related proceedings generally support this perspective on past events. 7Robert received the whole of the Breakwell property which was wholly owned by Nada at her death and took the Kemp property, which he held as a joint tenant with Nada, by survivorship at her death. 8During the deceased's lifetime she had also apparently transferred to Robert another property in Morts Road, Mortdale (the Morts property) which I was told by the parties has a net equity of approximately $500,000. 9Nada had also provided for Steven during her lifetime by transferring to him with a property in Milsop Place, Mortdale (the Milsop property). 10Thus the scheme of Nada's quite generous testamentary planning for her two sons, according to Steven at least, was that both he and Robert would have a house to live in and two rental properties from which they could earn income. Steven the elder brother would have the Milsop property to live in, and the Jersey and George properties to rent out. Robert would have the Breakwell property, as the house that would Robert apparently planned to live in and in addition would have the Kent and Morts properties from which he could earn rental income. There were other assets in the estate, money in the bank and superannuation which were all divided equally. Steven's evidence was "my mother did not play favourites between Robert and I. She treated us as both equally". An observation which is well supported by the structure of Nada's will. 11After Nada's death and during the administration of her estate, Robert declined to proceed with the transfer of his share of the Jersey property to Steven, which led to disputes and then litigation between them. Steven's position in these disputes was that Robert was only entitled to his respective interests in the Breakwell and Kemp properties, if he was prepared to go ahead with the transfer of the Jersey property to Steven. He paints a picture of interdependent promises, before Nada's death, in which Robert agreed to give up his one third interest in the Jersey property in exchange for receiving the Breakwell and Kemp properties. These disputes remained unresolved from Nada's death in 2006 to 2009. 12On 30 June 2009, after negotiations and upon legal advice, Steven, Robert and the executor, Jordan, signed a deed of release attempting to resolve these disputes. That June 2009 deed of release, unfortunately itself became the source of litigation before Pembroke J. It provided that Robert would transfer his interest in the Jersey property to Steven on certain conditions. These conditions included that Steven should withdraw certain 2007 proceedings he had brought under the Family Provision Act 1982 against the estate and that the parties would provide mutual releases. 13But the June 2009 Deed of Release was subject to another condition (cl. 3.19) that Steven would use his best endeavours to procure a removal of a caveat over the Jersey property, one which had been filed on behalf of his estranged wife, Jovanka. The Deed of Release provided that it would be of no force and effect if he was not able to procure the caveat's removal. In the result he was not able to persuade Jovanka to remove the caveat. He nevertheless sought relief by way of specific performance of the June 2009 Deed of Release before Pembroke J. In the alternative he sought an order that he be granted leave to withdraw his discontinuance of his 2007 Family Provision Act proceedings or be able to commence similar Family Provision Act proceedings out of time. 14In proceedings to enforce the Deed of Release Pembroke J found, on 16 November 2012, that it was void by reason of non-compliance with clause 3.19 and that it therefore could not be specifically performed: Stojanovski v Stojanovski [2012] NSWSC 1338. I understand from what is put to me in these separate caveat proceedings that Pembroke J has now given directions to permit Steven to apply to bring Family Provision Act proceedings out of time. Those proceedings before Pembroke J (proceedings 2012/89349) have now been restructured in that way. 15Pembroke J made findings confirming that Robert agreed in writing to transfer his joint interest in the Jersey property to Steven: Stojanovski v Stojanovski [2012] NSWSC 1338 at [2]. In that passage his Honour found as follows:- "On the same day that [Nada's] will was signed, the first defendant [Robert] signed a document declaring that he gave his share of the Jersey Avenue to the plaintiff [Steven], 'in line with my mother's last will'. However after his mother's death he resiled from that declaration. The plaintiff was therefore compelled to commence proceedings under Family Provision Act 1982 in an endeavour to obtain whatever his mother intended." 16Steven's application to bring fresh Family Provision Act proceedings out of time (Family Provision Act s 16) is in my view at least arguable, given that his 2007 Family Provision Act proceedings were only to perform the 2009 Deed of Release, which was declared void in 2012. Mr Bevan of Counsel for Steven has tendered the affidavits and other evidence that would be adduced in support of the Family Provision Act claim were an extension of time to be granted. It is not necessary for the purposes of these reasons to analyse that material, other than to express the Court's conclusion that it sets out at least an arguable case for an order for provision under Family Provision Act s 7 in the circumstances that have occurred. 17Nada's estate was fully administered by 2009. The executor, Jordan, transferred the Breakwell and Kemp properties into Robert's name that year. And the other estate property has been distributed to Steven and Robert. 18But after Pembroke J's November 2012 decision, and on 31 May 2013, Robert and Angelina executed a settlement under the Family Law Act resolving certain alleged property disputes between them. I am told that Angelina and Robert had been separated since March 2012 thereby attracting the jurisdiction of the Family Court for the making of such orders. Not much is known about this Robert-Angelina settlement, but some aspects of it may be inferred from external records. The Certificates of Title for each of the Breakwell, Kemp and Morts properties shows they were transferred "for no consideration" to Angelina on 31 May 2013. But the full terms of the 31 May 2013 settlement between Robert and Angelina have not been revealed by either Robert or Angelina. 19The May 2013 Angelina - Robert settlement has led to something of a stand off. Steven's lawyers only very recently discovered that the Breakwell, Morts and Kemp properties have now been transferred, without consideration to Angelina. I am told the total net value of these properties is of the order of at least $2,000,000, although Angelina seems to dispute that they are this valuable. 20As Nada's estate has long been fully administered, Steven's new Family Provision Act claim would require the Breakwell and Kemp properties to be designated as notional estate to satisfy any order for provision, as there is nothing else left in the estate: Family Provision Act s 24. But whether or not these properties were successfully to be designated as notional estate in future proceedings would be a matter for argument, in light of the statutory relevant considerations: Family Provision Act s 28. But the claim seems to me, on the material before this Court on this application, to be at least arguable. 21Steven wants to pursue his Family Provision Act proceedings. He accepts that in order to have the Breakwell and Kemp properties designated as notional estate he needs to know on what terms Angelina has received them. But the terms of the May 2013 settlement deed are private between Robert and Angelina and the Family Court has not yet permitted Steven to see them. But I am told that an appeal will be brought against the current Family Court of Australia decision preventing his access. In the meantime progress in Steven's Family Provision Act claim is stalled. 22The foundation of Steven's present application to extend the caveats over the Breakwell and Kemp properties is his fear that Angelina will herself deal with the Breakwell and Kemp properties before he is able to have them designated as notional estate. Steven's submission is that if Angelina deals with these properties by selling them to bona fide purchasers for value without notice of his claim, those persons would be likely to have a good answer to Steven's claim to designate the properties as notional estate. Steven therefore has filed the two caveats numbered AH977899N and AH9778908Q on the Breakwell and Kemp properties. Angelina has served a lapsing notice on Steven the caveator, which would have expired at midnight on 3 October 2013. But it was extended in circumstances which will be briefly explained below. 23On 30 September 2013 in the Duty List Steven sought to leave to abridge the time for service of summons seeking to extend the operation of these two caveats. The summons was served on Angelina and made returnable before the Court on 2 October when argument took place. 24Angelina was not legally represented. Mr Bevan of counsel represented Steven. Angelina applied for an adjournment of the proceedings. But as she was not prepared to give an undertaking either not to deal with the properties or to agree to extension of the caveat beyond midnight on 3 October, the Court only gave her two limited adjournments. After the proceedings were argued on 2 October between approximately 10.00am and 11.30am Angelina was given an adjournment until 3pm either to find lawyers or to advance any evidence she wanted to put before the Court on the application. 25Angelina said that she had insufficient time to respond to the service of the process upon her. But I am satisfied that process was served upon her by email by 4.45pm on Monday 30 September 2013 at an email address she uses. I am also satisfied that the Court papers were left at her residential address by 6pm the same evening. She had more than a full day to prepare for this application. 26She then sought for the Court to refer her to a pro bono lawyer. But the Court declined to do that. The undisputed evidence was that under the May 2013 Deed of Release she received the Morts property worth $500,000 and which Steven does not seek to designate as notional estate. The Court's pro bono referrals scheme should not be burdened with people who have $500,000 in unencumbered assets. Far more necessitous persons have demands upon the services provided under this scheme. Moreover, as these reasons show, even without legal representation the plaintiff was able to advance quite sophisticated legal arguments. 27Angelina took up the opportunity that the Court affdorded on 2 October in the course of argument to put on further evidence about Steven's undertaking as to damages, the balance of convenience and the detriment she would suffer if the caveats were extended when injunction granted. She had not put on such evidence by 2 October so the Court afforded her an opportunity to do so by 3 October and the matter resumed the next morning for an argument that took about 40 minutes, after which the caveat's were extended to today so the Court could give judgment today.
Consideration of the parties' contentions 28Steven's principal application under Real Property Act s 74K(2) is for extension of the operation of the existing caveats over the Breakwell and Kemp properties on the basis that they "have or may have substance". In the alternative he seeks injunctive relief restraining Angelina from dealing with the two properties. I will deal with each of these applications in turn. Angelina challenges Steven's claim that he has a caveatable interest. In order for the caveat to be extended under Real Property Act s 74K(2) it is necessary for the caveator to demonstrate that there is a cavaeatable interest under Real Property Act s 74F. The onus lies on the caveator under Real Property Act s 74K to show that there is an arguable case for final relief that the caveator has an equitable interest in the land, even if that claim may not be without its difficulties: Queanbeyan Leagues Club v Poldune Pty Ltd (1996) 7 BPR 15,078 ("Poldune"), Wilson v Graham (1997) 10 BPR 19,051 ("Wilson"). 29Angelina initially advanced some unpersuasive arguments on the issue of caveatable interest. She argued: that Steven could not possibly succeed because his Family Provision Act claim was out of time; that there had not yet been a Family Provision Act hearing and that the principal proceedings before Pembroke J have been in relation to the Jersey property and not the Breakwell and Kemp properties. But as Poldune and Wilson make clear, the fact that the principal claim has not yet been determined is no answer to a caveator seeking to maintain a caveat on title. The fact that there may be some way to go before a final hearing is not decisive against the caveator, provided there is some basis for the caveator's claim. Thus, the fact that Steven has not yet secured a final hearing of his Family Provision Act proceedings does not answer his claim to extend the caveats. 30But Angelina has a better answer to Steven's claim. She submits that Steven's existing Family Provision Act claim against Jordan as executor of Nada's estate, is not a claim giving rise to a presently existing equitable interest in the Breakwell and Kemp properties. 31In my view this argument is persuasive for several reasons. First, leaving aside the distribution of this estate, a claimant under the Family Provision Act against an executor of an estate cannot ordinarily demonstrate a caveatable interest: Quek v Beggs (1990) 5 BPR 11,761 (McLelland J), Bethian Pty Ltd v Green (1977) 3 Fam LR, and Cetojevic v Cetejevic [2006] NSWSC 431 at [55] (Cambell J). The principle is that a caveat must be supported by an equitable interest in the land present at the time that the caveator lodges the caveat, and it is insufficient that it has some potentially enforceable right against the registered proprietor, which has not yet ripened into an interest: Re Pile's Caveats [1981] Qd R 81 at [83] and Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672. In my view Steven does not have a caveatable interest against the estate, in this sense. 32Mr Bevan counters this conclusion by arguing that really he is seeking to enforce Jordan's claim as executor against Robert, and in turn Angelina, for an interest in the Breakwell and Kemp properties. He says Steven is merely seeking as a Family Provision Act claimant to ensure that the executor does his duty to claim back notional estate in which he has an equitable interest. Mr Bevan argues that the executor of an estate has a legal and beneficial interest in all estate assets until the estate is fully administered: Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 at 312. Therefore Mr Bevan argues that Jordan has an equitable interest in the notional estate. 33But there are two answers to Mr Bevan's argument: one from authority and the other from general principle. In Quek v Beggs (1990) 5 BPR 11,761 McLelland J has already stated that a claim to have property designated as notional estate under the Family Provision Act does not give rise to a caveatable interest in that property (at p 44). Secondly, cases such as Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 do not apply because Jordan as executor no longer holds the property he has distributed. He does not any longer have an equitable or a legal interest in the estate's property, which has been fully administered. Steven's claim that Jordan has a caveatable interest in the Breakwell and Kemp properties as possible notional estate is unsuccessful. I am therefore not prepared to extend the caveat under Real Property Act s 74K(2) on that basis. 34But Steven does have an arguable claim to an equitable interest in the Breakwell and Kent properties. The Breakwell and Kemp properties were arguably held on constructive trust by Robert for the estate. And in turn Angelina may in the circumstances of the May 2013 settlement have taken them subject to that constructive trust. The alleged constructive trust arises from the three-way arrangements between Nada, Robert and Steven made just before Nada's death in which they all agreed to the distribution of her property in a particular way. It seems clearly arguable that Nada, and Steven, received a promise from Robert that he would relinquish his interest in the Jersey property at the same time as taking the Breakwell and Kent properties. He has done the latter but not the former. Nada arguably made her will with the dispositions contained within it in reliance upon Robert's promise to her. She has now died and her estate has been distributed in performance of her side of the promise from Robert which is evidenced in writing in relation to the Jersey property. The situation is analogous to parties making mutual wills, where the survivor may be held to hold property on constructive trust, so that the survivor is held to a promise to the deceased which has been given in exchange for the operation of the deceased's will: Birmingham v Renfrew (1937) 57 CLR 666. Ordinarily the constructive trust would attach to Robert's interest in the Jersey property on these doctrines. But these caveats have been lodged in respect of the Breakwell and Kent properties. But it seems to me that equity's remedial jurisdiction in constructive trust, to ensure that Robert is held to the agreement he made before Nada died, would extend to him posing an equitable charge on the Breakwell and Kent properties which are distributed to Robert as part of the deceased's performance of her side of the bargain, if for example, Steven's interest in the Jersey property were not available any longer or had lost value: Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78, at 615. Thus, the constructive trust remedy may warrant the finding of Steven's interest in the Jersey property, the Breakwell property or the Kent property. I should add that although this claim is more than six years old an extension of the limitation period is also clearly arguable by reason of Robert's conduct in relation to the 2009 Deed of Release. 35But how does an equitable claim against Robert justify lodging of a caveat over Angelina's property? There seems to me to be quite sufficient evidence of Angelina's knowledge and involvement in the proceedings before Pembroke J for her to be fully aware of various claims that Steven might bring against Robert and the estate. The May 2013 settlement bears some features of a transaction by Robert in fraud to deliberately defeat Steven's or the estate's claims. Some of these features are described later in this judgment. In particular, all that is known of this settlement is that Robert seems to have dispossessed himself of all of his substantial assets to Angelina, in what does not obviously look like a genuine bargain between separating spouses. On the known facts it is quite arguable that Steven would retain personal equities against Angelina or that the fraud exception to her indefeasibility of title under Real Property Act, s 42 may be engaged. 36The pleadings in the existing proceedings before Pembroke J are wide enough generally to encompass this claim, and indeed the claim to an equitable interest based upon part performance of the 2009 deed of release. But the existing caveats although they referred to those proceedings, only rely upon the fact that the Breakwell and Kemp properties are "subject to a Family Provision Act claim". For the reasons already stated that is insufficient in my view. Therefore the course which the Court will take is to allow the existing caveats to lapse but to grant leave to Robert to lodge a further caveat under Real Property Act, s 74O(2), notwithstanding that lapse. That fresh caveat can be lodged today before the existing caveat lapses. 37But is Steven entitled to an injunction? In my view the circumstances of this case would warrant the grant of an injunction in the nature of a freezing order under Uniform Civil Procedure Rules 2006 r 25.10 - 25.17. But because I have concluded that leave should be granted to file a further caveat, it is not necessary to determine this question. 38The circumstances of this case demonstrate that Angelina and her husband Robert have been prepared to secretly transfer the Breakwell and Kemp properties out of Robert's ownership after Pembroke J's orders in 2012 and before his Honour's proceedings were completed, in circumstances where it must have been clear that Steven would attempt to designate these two properties as notional estate. 39Angelina submitted in the course of argument that she had obtained legal advice and was quite within her rights not to tell anyone that she and Robert had made the May 2013 settlement, which took the Breakwell and Kemp properties out of Robert's hands. Her right to take that advice is undoubted. But she deliberately took the advice and deliberately decided to keep the transaction a secret, until it was discovered by Steven's lawyers in the course of routine searches. This was arguably deliberately designed between Robert and Angelina to remove these properties from Robert's possession and Steven's reach, without him knowing. 40Equally troubling is Pembroke J's finding in his principal judgment that Robert "should carefully consider his position" because this litigation has only become necessary as Robert "resiled from the solemn promise that he made to his mother and his brother on 3 January 2006": Stojanovski v Stojanovski [2012] NSWSC 1338 at [21]. Robert is apparently someone who is quite prepared to resile from solemn promises. He and Angelina have dealt with these properties together. Angelina has not given any account of her dealings with these properties; and has not given any undertaking not to deal with these properties. In these circumstances the Court would be willing in the Court's jurisdiction to make a freezing order as there is a danger that Angelina will deal with assets in this jurisdiction to prevent Steven having any judgment satisfied: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319. 41Of course it is necessary before an injunction is granted or caveats extended by order for the Court to be satisfied that it is warranted on the balance of convenience. The Court is not extending the caveats but allowing further caveats to be filed. If the balance of convenience needs to be satisfied in these circumstances, in my view it would be in this case. Angelina has not provided an undertaking not to deal with the two properties, and in light of her past conduct, the risk of her dealing with the property without further notice to Steven is high. The balance of convenience therefore would strongly favour the grant of injunction. Indeed the case was adjourned to give Angelina an opportunity to consider whether she wanted to put any balance of convenience evidence on. Angelina's balance of convenience evidence did not indicate that there was any particular transaction that she proposed to enter in respect to the Breakwell and Kent properties and spoke generally of an increase in costs to her and a loss of market value of those properties. None of those considerations in my view weighs strongly against the legitimate risk that is to be inferred in this case that Angelina may well deal with these properties, if a caveat protecting Steven's claimed equitable interest is not left on their title. 42Angela also challenged the quality of Steven's undertaking as to damages. But Steven is a personal not a corporate plaintiff and one who has received considerable assets from Nada's estate and who was represented by lawyers in these proceedings. I do not see any proper basis on the evidence to doubt the quality of any undertaking as to damages that Steven would give. However, the Court is merely allowing leave for a further caveat to be filed under Real Property Act, s 74O(2). This case though does warrant him giving an undertaking as to damages in exchange for that leave.
Conclusions and Orders 43In the result therefore the Court has decided not to extend the caveats over the Breakwell and Kemp properties but will grant leave under Real Property Act, s 74O(2) to Steven to file fresh caveats today in conformity with these reasons, if he provides an undertaking as to damages. 44Upon the plaintiff giving to the Court through his counsel the usual undertaking as to damages, which is noted, the Court orders that:-
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 October 2013
Stojanovski
Stojanovski
(1977) 3 Fam LR 11
(1937) 57 CLR 666
(1985) 160 CLR 583
(1990) 170 CLR 306
(1989) 18 NSWLR 319
(1985) 5 NSWLR 529