Varcity Solutions Pty Ltd v Gulliver; Varcity Solutions Pty Ltd v Jagbo Pty Ltd

Supreme Court of NSW|2020-10-16|Before: Robb J

Solicitors: Gavin Parsons and Associates (plaintiffs in both proceedings) Patrick Grimes & Co Solicitors (defendant in 2019 / 85939 and third defendant in 2019 / 67547) File Number(s): 2019 / 85939; 2019 / 67547

Judgment

The plaintiffs in these proceedings are Varcity Solutions Pty Ltd and Paidonexchange Pty Ltd. The defendant is Ms Jennifer Adriana Gulliver. I will call these proceedings the "caveat proceedings" to distinguish them from related proceedings to which reference will be made below.
The question for determination in the caveat proceedings is whether or not the Court should order the withdrawal by the plaintiffs of a caveat lodged by the plaintiffs against the title to a residential property at Riverview in this State that is solely owned by Ms Gulliver.

Relief claimed in the summons

The plaintiffs filed their summons commencing the proceedings on 18 March 2019, following the defendant serving a lapsing notice on them.
The final relief claimed in the summons was in the following terms: 1. A declaration that the Plaintiffs hold an interest in the [Riverview property] being the lands described in [title details] pursuant to a resulting trust.
The plaintiffs sought the following interlocutory relief: 4. An order pursuant to s 74K of the Real Property Act 1900 (NSW) extending the operation of [the caveat], lodged in relation to the land situated at [Riverview] in the State of New South Wales, being [title details] until further order. 5. Upon the Plaintiffs providing the usual undertaking as to damages the operation of [the caveat], be extended until further order. 6. Further or in the alternative the Plaintiff seeks an order: a. Pursuant to Section 74L Real Property Act 1900 (NSW), that the Court shall disregard any failure of the Caveator to comply strictly with the requirements; and/or b. Pursuant to section 74K(2) Real Property Act 1900 (NSW), that the Plaintiff be granted leave to amend the caveat if necessary; and/or c. Pursuant to Section 74O Real Property Act 1900 (NSW), that the Plaintiff be granted leave to lodge a fresh caveat if necessary.

Related debt proceedings

The plaintiffs commenced separate proceedings by statement of claim filed on 1 March 2019. The debtor is the first defendant. It is a company controlled by Ms Gulliver's husband. Mr Gulliver is the second defendant. Ms Gulliver is the third defendant. I will call these proceedings the "debt proceedings".
By the first two prayers for relief in the statement of claim, the plaintiffs claimed declarations in the alternative that Mr Gulliver holds an interest in the Riverview property "pursuant to a resulting trust" or "pursuant to a constructive trust".
Prayer 3 in the statement of claim is in the following terms: The Third Defendant be restrained from disposing, encumbering or otherwise dealing with the [Riverview property] until further order.
By prayer 4, the first plaintiff sought judgment against the debtor and Mr Gulliver as guarantor in the sum of $61,074 plus interest.
The second plaintiff, by prayer 5, sought judgment against the debtor and Mr Gulliver as guarantor in the sum of $255,131.27 plus interest.
Thus, while in the summons in the caveat proceedings the plaintiffs have sought a declaration that Ms Gulliver holds an interest in the Riverview property on a resulting trust for her husband, in the statement of claim in the debt proceedings the interest is claimed to have been based upon either a resulting trust or a constructive trust.
It will not be necessary for the purpose of these reasons to set out in detail the allegations of fact in the statement of claim in the debt proceedings relevant to the debt claims against the debtor or the guarantee claims against Mr Gulliver. The hearing was conducted upon the basis that the plaintiffs probably have a good claim in debt against the debtor and against Mr Gulliver under the guarantee.
The statement of claim contained the following allegations concerning the creation of the resulting or constructive trust in favour of Mr Gulliver over Ms Gulliver's Riverview property: 46. [Mr Gulliver] resides at the [Riverview property] ("Property"). 47. [Ms Gulliver] is the registered proprietor of the Property. 48. The Property was purchased for $1,500,000 pursuant to a Contract for Sale dated 4 May 2012. 49. Settlement of the property occurred on 27 July 2012. 50. [Mr Gulliver] holds an equitable interest in the Property as a result of a resulting trust formed at the time of purchase through the use of joint funds. 51. In the alternative [Mr Gulliver] holds an equitable interest in the Property as a result of a constructive trust arising out of the following interests: a. The funds applied to the maintenance of the Property (including but not limited to financial contributions to any mortgage, rates, insurance, renovations and outgoings) through the loans obtained from the First Plaintiff and the Second Plaintiff. b. As a result of the funds applied to the maintenance of the Property (including but not limited to financial contributions to any mortgage, rates, insurances, renovations and outgoings) through funds received from the revenues of the [debtor] or him personally. c. Through the build-up of an equitable entitlement by virtue of his marriage to [Ms Gulliver]. 52. On entering into each of the loan agreements with the First Plaintiff and the Second Plaintiff [Mr Gulliver] charged his interest in the property: a. With payment of the obligations of the [debtor]; b. With payment of his obligations as guarantor; and c. With payment of his obligations personally. 53. Equity is available in the Property to satisfy the claims of the First Plaintiff and the Second Plaintiff. 54. The First Plaintiff and the Second Plaintiff are concerned that [Ms Gulliver] may seek to dispose, encumber or otherwise deal with the property in a manner that would dilute or dispose the interest of [Mr Gulliver] to assist him in avoiding payments owed under the personal guarantees offered to the First Plaintiff and the Second Plaintiff.
The statement of claim is devoid of any particularity.
While a claim is made in par 50 that Mr Gulliver has an equitable interest in the Riverview property by reason of a resulting trust formed at the time of purchase through the use of joint funds, there is no specification of the nature of the joint funds of Ms Gulliver and her husband alleged to have been used in the purchase of the Riverview property.
This is significant, because, by the end of the hearing, there continued to be no identification by the plaintiffs of how any joint funds were applied in the purchase of the Riverview property. That allegation is contrary to the only evidence that was before the Court. I will refer to this evidence below.
There are also no particulars given of the manner in which the alleged constructive trust is claimed by the plaintiffs to become imposed on the Riverview property.
Furthermore, the statement of claim is not drafted in a way that makes clear the nature of the constructive trust alleged by the plaintiffs. I will consider the relevant principles more fully below. For the present, it is to be noted that there is no indication of whether the constructive trust is said to be a common intention constructive trust, or whether it is the type of constructive trust that may arise on the unexpected termination of a joint endeavour between the parties to a relationship.
Strictly, the plaintiffs only allege that the constructive trust arose because Mr Gulliver applied funds obtained through the loans made by the plaintiffs to the maintenance of the Riverview property in the manner specified in par 51, or alternatively, the funds that were applied were from the revenues of the debtor or Mr Gulliver.
The final allegation made by the plaintiffs asserts a principle that a party to a marriage, by virtue of the marriage, will build-up an equitable entitlement to a property owned by the other party to the marriage.

History of the two proceedings

When the caveat proceedings were commenced before Kunc J on 18 March 2019, his Honour extended the caveat up to 20 March 2019, and, on 20 March 2019, his Honour made an order extending the caveat until further order of the Court.
Both the caveat proceedings and the debt proceedings have been case managed in the Real Property List by Darke J.
Darke J gave leave to the plaintiffs to file a notice of motion seeking default or summary judgment against the debtor and Mr Gulliver, and such a notice of motion was filed on 18 March 2020.
On 12 June 2020, Darke J made orders that each proceeding, including the plaintiffs' notice of motion in the debt proceeding, be set down for hearing before me on 16 October 2020, to be heard concurrently with the other proceeding. His Honour made the usual order for hearing in accordance with the Real Property List Practice Note.
The plaintiffs changed their solicitor, and, on 30 September 2020, the plaintiffs' present solicitor filed a notice of change of solicitor. It is now apparent that the change in the plaintiffs' solicitor has put in train an unfortunate chain of events that led to a misunderstanding as to the matter that was to be heard by the Court on 16 October 2020.
Not only were the orders made by Darke J on 16 October 2020 unambiguous, but, on 6 October 2020, my associate sent an email to the solicitors for the plaintiffs and Mrs Gulliver that stated that both matters were listed for hearing before me on Friday, 16 October 2020.
At the hearing on 16 October 2020, the plaintiffs and the defendant were represented by counsel. The proceedings were called outside court, and there was no appearance for the debtor or Mr Gulliver.
There was evidence of service of the statement of claim in the debt proceedings on both the debtor and Mr Gulliver. Mr Gulliver was clearly aware of the proceedings, because he had sent a number of communications to the Registry asserting that he was medically unable to come to court.
Counsel for the plaintiffs informed the Court that it was the plaintiffs' understanding that the only matter for determination by the Court was whether the caveat should be further extended, or whether an order should be made for the withdrawal of the caveat.
The Court was informed by counsel for Ms Gulliver that she understood that both proceedings were before the Court for final hearing, and Ms Gulliver was ready to proceed with both matters.
Counsel for the plaintiffs advised the Court that no evidence had been served by the plaintiffs to prove their cases against all three defendants in the debt proceedings, and he acknowledged that, if the Court proceeded to hear the debt proceedings, the plaintiffs would necessarily fail.
The plaintiffs were not even ready to proceed to obtain default or summary judgment on their claims against the debtor and Mr Gulliver.
The Court initially accepted that proposition, although, in the course of the hearing, my staff discovered that the plaintiffs had filed an affidavit of an officer of the plaintiffs that contained the evidence required to proceed on the notice of motion for default judgment against the debtor and Mr Gulliver.
After some argument and a number of adjournments, file notes were tendered that were prepared by the plaintiffs' solicitor of a telephone discussion between the solicitor and Ms Gulliver's solicitor on 6 October 2020, which satisfied me that, reasonably or not, the plaintiffs' solicitor genuinely believed, at the end of the conversation, that the only matter that would be dealt with by the Court on 16 October 2020 would be the issue of whether or not the caveat should be further extended or withdrawn.
I ruled in the circumstances that the Court would only deal with that issue on the day.
I indicated that I would make an order that the plaintiffs pay Ms Gulliver's costs, insofar as they were increased by the failure of the plaintiffs to be able to prosecute the hearing in the debt proceedings on 16 October 2020, on the indemnity basis.
I also advised the parties that they should confer and submit to my Associate draft short minutes of order, to ensure that, within a short space of time, the plaintiffs filed an amended statement of claim in the debt proceedings to specify the basis of the trusts alleged in favour of Mr Gulliver, with proper particulars of the facts supporting those claims. The case management orders will also ensure that the debt proceedings are ready before the end of term to be fixed for hearing at the earliest date possible.

Issue for determination

In these circumstances, I will now address the question of whether the Court should make an order that the plaintiffs withdraw the caveat. If no order is made, then the caveat will continue to be extended until further order under the order already made by Kunc J.
The plaintiffs accepted that, on an application such as the present, the plaintiffs bore the burden of establishing that the caveat should be further extended.
It was uncontroversial that the further extension of the caveat depends upon the plaintiffs establishing that, on the interlocutory evidence, there is a serious question to be tried that Mr Gulliver has the equitable interest in the Riverview property alleged by the plaintiffs, that the plaintiffs have a charge over that equitable interest, and that the balance of convenience favours the continued extension of the caveat: see Peters v Lithgow Forge Pty Ltd [2010] NSWSC 283 at [35]-[36]; and Capital Securities XVII Pty Ltd v Anna's Garden Pty Ltd [2019] NSWSC 1256 at [6].

The evidence

In the defence filed by Ms Gulliver in the debt proceedings on 20 November 2019, she substantially denied the allegations pleaded by the plaintiffs, Although, in par 7, she admitted that Mr Gulliver "paid some rates in respect of the property", she denied that "he applied any funds to the maintenance of the property in respect of mortgage, insurances, renovations, outgoings or otherwise". Ms Gulliver denied that Mr Gulliver had any equitable interest in the property from any constructive trust or by virtue of his marriage to Ms Gulliver.
Ms Gulliver gave evidence by her affidavit sworn on 20 June 2019.
Ms Gulliver said that she purchased the Riverview property by settlement taking place on 4 May 2012 for a price of $1,500,000 and the expenses of the purchase, with the assistance of a first mortgage from the ANZ in the amount of $1,349,590. Ms Gulliver explained that she was employed by Qantas for 24 years, and she used her redundancy package and her superannuation to purchase the Riverview property in her name alone.
Ms Gulliver said that she purchased the Riverview property in her name alone because she was concerned about putting the property in joint names with her husband, as he had not exhibited sufficient responsibility or judgment with money, and Ms Gulliver was anxious not to co-mingle her money and her husband's money.
Ms Gulliver re-mortgaged the Riverview property on 31 January 2017. The mortgage to the ANZ was discharged and a new advance of $1,476,000 was taken from a new lender on a first mortgage over the Riverview property.
Ms Gulliver said in par 8 of her affidavit: … I paid all monies due under the ANZ mortgage and I continue to pay the money due under the mortgage with Astute.
Ms Gulliver gave evidence of her subsequent employment with two different employers at a substantial salary and said: "… and this was sufficient to meet my repayments and make the payments associated with my lifestyle and that of my husband and children".
Ms Gulliver said in par 10: "… I had no assistance from Raymond in relation to either my living expenses or repayments on the mortgage".
Ms Gulliver also said, in par 10, that it was her practice to keep her money and her assets separate from those of her husband. She said that she did not know anything in regard to the loans made by the plaintiffs. Ms Gulliver signed nothing with either of the plaintiffs in relation to the money lent to the debtor or her husband.
Finally, Ms Gulliver said in par 13: I wish to renovate the property and to refinance the loan to take advantage of the reduced interest rates that are available, I cannot do so while the caveat remains on my property and I need the caveat to be withdrawn.
I will now move to a consideration of the evidence tendered by the plaintiffs.
The factoring agreement dated 24 August 2015, between the second plaintiff and the debtor, contained in clause 13.8 a term whereby the debtor and the guarantor charged in favour of the second plaintiff "all of their respective right, title and interest in any real property and/or personal property and assets". By clause 13.7, both the debtor and the guarantor consented to the second plaintiff lodging a caveat to protect the charge. By clause 13.4, it was agreed that the charge was in addition to any other security interest granted in favour of the second defendant.
The first defendant made loans to the debtor under a number of loan agreements, all of which were in identical terms. The provisions of the loan agreement included: 15. The Borrower and the Guarantor charge all their interest in the Property specified in the Schedule together with any interest in any other real property with payment of all monies pursuant to this Agreement, as security for payment of such moneys. 16. The Borrower and the Guarantor consent to the registration of a Ms Gulliver Caveat against the title to the Property or other real estate and to notification of the charge on any appropriate register.
For the purposes of the application, the defendant did not argue that the charging provisions in respect of other property did not cover any beneficial interest in the Riverview property held by Mr Gulliver, if such beneficial interest existed. Ms Gulliver's case was that there was no evidence that any such beneficial interest existed, and, in the circumstances, the balance of convenience favoured the making of an order for the withdrawal of the caveat.
Evidence was given on behalf of the plaintiffs by Mark Andrew Glover Smith who, at relevant times, was a director of the plaintiffs.
Mr Smith caused the plaintiffs to make the loans to the debtor on the guarantee of the husband following conversations with the husband.
In relation to the factoring agreement between the second plaintiff and the debtor, Mr Smith said in his 16 May 2019 affidavit: 10. I met with Mr Gulliver in person to discuss options and requirements for taking out a loan with Paidon. Our conversation consisted of words to the effect of: Me: 'I understand that it's a loan to assist with cash flow and capital expenses for your business'. Mr Gulliver: 'Yes'. Me: 'Okay so you will need to give a personal guarantee and provide some sort of collateral, do you own any property?' Mr Gulliver: 'Yes, no problem and yes I do, I have an interest in my wife's property, we agreed to buy it in her name but I have contributed a large amount to the purchase price and also pay most of the mortgage and other expenses, including maintenance. Almost everything is in my name, all bills and that, except for the actual title on the property. Me: 'Okay that should be good enough. Can you consent to a caveat or charge over the property in the event that you can't repay?' Mr Gulliver: 'Yes definitely, it is more my house than hers'. Me: 'Okay, I may also take shares in the Company as collateral, as it is an ongoing facility". Mr Gulliver: 'Okay I agree to that'.
The aspects of this conversation in which the husband made claims to have an interest in the Riverview property, and the facts that gave rise to that interest, were only admitted as evidence that the statements had been made, and not as proof of the facts asserted.
In relation to the loans made to the debtor by the first plaintiff, Mr Smith gave the following evidence: 22. On or about 15 April 2017, I spoke with Raymond (Mr Gulliver) over the phone to discuss options and requirements for taking out another loan. Me: 'I understand that it's some small loans to assist with cash flow for your business' Mr Gulliver: 'Yes.' Me: 'Okay so you will need to give a personal guarantees and provide some sort of collateral, likely the same property that you have already given to Paidon and in addition to the shares you have transferred already to me?' Mr Gulliver: 'Yes definitely, as I've told you before it is more my house.'
The husband's statement about his interest in the Riverview property was admitted with the same restriction as the earlier evidence.
On the evidence, the plaintiffs did nothing to follow up Mr Gulliver's claims by making any inquiries of Ms Gulliver. All of the advances were made by the defendants solely upon the generally worded and unsubstantiated claims made by the husband, save for the following inquiries which Mr Smith deposed to in his 27 June 2019 affidavit in reply to Ms Gulliver's affidavit.
Mr Smith made some additional inquiries on behalf of the plaintiffs. Insofar as the evidence of the inquiries was admitted, it included a HCF membership card in the name of Mr Gulliver showing that Mr Gulliver, Ms Gulliver and their two children were persons covered. It included at Telstra tax invoice addressed to the debtor for a telephone number that Mr Smith understood was a number associated with the Riverview property. There was also an Origin tax invoice for the supply of gas to the Riverview property in the name of the husband. That was it.
The two tax invoices bear dates after the date of the factoring agreement between the second plaintiff and the debtor and Mr Gulliver.
In his second affidavit, Mr Smith explained, in par 20, why he had made no enquiries of the defendant. They included that she was not a director or shareholder of the debtor. Further: b. Ray had said to me in or around August 2015, words to the effect of: RG: "I have already been over it with her and of course she supports me and the business as it is for her benefit also" and RG: "I work from home so she is fully aware of everything I am doing".
This evidence was also admitted subject to the qualification that it did not prove the facts asserted.
Mr Smith said explicitly that he believed the representations made by the husband and that he had no reason to doubt those representations.
The evidentiary position therefore is that there is sworn and credible evidence of Ms Gulliver that she purchased the Riverview property solely in her own name using her own funds and mortgages organised by her. She had a salary sufficient to pay all mortgage payments. She accepted that her husband paid some rates in respect of the property. It may also be, unexceptionably, that the husband paid some household expenses.
The plaintiffs acted solely on representations made by the husband, and did not take any steps to obtain confirmation from Ms Gulliver. More significantly, the plaintiffs did not attempt to obtain any security over the Riverview property granted explicitly by Ms Gulliver.
The defendants acted on scant evidence that established no more than that Mr Gulliver may have paid some household bills in a limited way.
The plaintiffs had no evidence that any joint assets of Ms Gulliver and her husband were applied in the purchase of the Riverview property. They did not even have any evidence that the husband had made any mortgage payments.
As a forensic matter, over the period of more than 18 months since the plaintiffs' summons in the caveat matter was filed, the plaintiffs have taken no forensic steps, using the Court's processes, to obtain any evidence that might prove that, in any substantial way, Mr Gulliver may have made payments in relation to the Riverview property that could arguably have given rise to the creation of an equitable interest of the husband in the Riverview property.

Absence of serious questions to be tried

I will now consider whether the plaintiffs have established a sufficiently serious case to be tried that their charge over Mr Gulliver's property attaches to an equitable interest in the Riverview property, by reason of Ms Gulliver holding part of the title to that property on trust for her husband.
I will start by disposing of a number of the bases of the plaintiffs' claim that a trust exists that I consider to be untenable on the evidence, even to the interlocutory standard.
First, insofar as the plaintiffs allege that a resulting trust arose, I consider that the principles have been correctly stated by White J (as his Honour then was) in Shepherd v Doolan [2005] NSWSC 42 as follows: [20] The initial presumption which arises from the fact that the deceased was the registered proprietor of the Norah Head property is that he had full ownership of it, and there is no beneficial interest in favour of someone else which was imposed on his legal title. (Currie v Hamilton [1984] 1 NSWLR 687 at 690; Black Uhlans Inc v New South Wales Crime Commission & Ors [2002] NSWSC 1060 at [128]). [21] However, where two persons jointly provide the purchase money for property and the property is put into the name of one of them, then, unless the relationship between the parties gives rise to a presumption of advancement, it is presumed that the beneficial ownership of the property is held in the proportions in which they each contributed the purchase money. (Calverley v Green (1984) 155 CLR 242 at 246-247, 258-259). There is no presumption of advancement as between de facto partners. (Napier v Public Trustee (WA) (1980) 55 ALJR 1 at 3 ; 32 ALR 153 at 158; Calverley v Green at 260, 268-269; cp Calverley v Green at 250-251,264-265). The presumption can be rebutted by evidence of actual intention. [22] It was submitted for the defendants that the plaintiff's evidence rebutted any presumption of a resulting trust. It was submitted that her payment of £100 was a gift, and that the reason which she gave for the property being purchased in the deceased's name only, when it could have been purchased in their joint names, indicated that he should have the entire beneficial ownership commensurate with the legal title. The plaintiff said that the property was put in the deceased's name because at that time he did not own a house. I do not think that the evidence displaces the presumption of a resulting trust, if that presumption otherwise arises. There were no words of gift, assuming, which I doubt, that any reliance could be placed upon professed recollections of conversations occurring almost forty years ago. [23] Ordinarily, the presumption of a resulting trust arises at the time the property is acquired. If the presumption is not displaced, then, unless there is a later agreement to alter the equitable interests in the property acquired, or the beneficial interests arising under the resulting trust are displaced by an interest arising under a constructive trust, the interests are not changed by later contributions to the conservation or improvement of the property. (Currie v Hamilton [1984] 1 NSWLR 687 at 691; Calverley v Green at 262-3). If the evidence establishes that it was the intention of the parties that their respective interests should be in accordance with something other than their contributions to the purchase price, such as their contributions to the purchase of the land and discharge of a mortgage, effect will be given to that intention so that although the trust will arise at the time of purchase, the quantum of their interests will fluctuate in accordance with that intention. (Bloch v Bloch (1981) 55 ALJR 701 at 704; Currie v Hamilton at 692; Calverley v Green at 262-263). There is no such evidence in this case.
The only evidence is that Ms Gulliver purchased the Riverview property with her money and an amount borrowed by her on the security of a mortgage over her property. There is no evidence at all that Mr Gulliver provided any money for the purchase. He did not even represent to Mr Smith in any clear way that he did so. Even if the husband subsequently paid some mortgage payments, as the plaintiffs allege, those payments are not recognised as forming part of the purchase price: see Shepherd v Doolan at [27].
Secondly, there is no authority supporting a principle that an interest in the property owned by one party to a marriage gradually accrues to the other party of the marriage simply by reason of the existence of the matrimonial relationship. Courts exercising family law jurisdiction may have power to make orders conferring an interest in the property owned by one party to the marriage on the other, but that interest is only created when the Court makes the order in the exercise of its jurisdiction. Equity does not recognise any interest in property owned by one party to a marriage simply by reason of the existence of the marriage. Nor does the extent of the other party's interest increase merely by reason of the duration of the marriage.
The only question therefore can be whether there is a serious case to be tried that Ms Gulliver held an interest in the Riverview property on constructive trust for her husband.
An aspect of the plaintiffs' claim that Ms Gulliver held the Riverview property on a constructive trust appears to be that Mr Gulliver used some part of the money borrowed from the plaintiffs, or some part of the money earned from the use of the money borrowed, for the purpose of making the payments alleged by the plaintiffs in relation to the maintenance of the Riverview property. There is not the slightest evidence that this allegation is true in fact.
More significantly, in principle, it cannot matter to the question of whether payments made by Mr Gulliver gave rise to a constructive trust what the source of the monies applied by the husband was. Furthermore, it cannot improve the plaintiffs' claim that the source was money borrowed from the plaintiffs, or money earned from the use of that money. The only question can be whether the circumstances in which Mr Gulliver made payments for the maintenance of the Riverview property using his own money gave rise to a constructive trust in his favour.
Both in the statement of claim in the debt proceedings, and in the plaintiffs' submissions at the hearing, they alleged no more than that the constructive trust arose simply upon the basis that Mr Gulliver made the payments for the maintenance of the Riverview property that they alleged.
First, there was no positive evidence at all that Mr Gulliver made the payments alleged. A small amount of evidence that the husband made some minor contributions to family expenses is entirely insufficient.
Secondly, the plaintiffs have done nothing to identify the existence of circumstances that have been accepted as a matter of equitable principle as being capable of giving rise to a constructive trust.
Again, the relevant equitable principles have been comprehensively but succinctly set forth by White J in Shepherd v Doolan in the following terms: [30] The ultimate basis for the imposition of a constructive trust is that it would be unconscionable for the holder of the legal title to the property to assert that he holds it free of any beneficial interest in the claimant. However, although "unconscionability" is the underlying basis upon which equity will intervene, it is not itself a sufficient description of the principles upon which equity does so. Equitable rights do not arise merely because the Court considers it fair in all the proven circumstances that the legal owner of property should hold it, or a portion of it, for the benefit of another. (Muschinski v Dodds (1985) 160 CLR 583 at 615-616). [31] One class of case where equity will intervene to prevent the unconscientious denial by the legal owner of another party's rights, is where the parties agreed, or it was their common intention, that the claimant should have an interest in the property owned by the other, and the claimant acted to his or her detriment on the basis of that agreement or common intention. (e.g Grant v Edwards [1986] Ch 638; Green v Green (1989) 17 NSWLR 343; Maharaj v Chand [1986] AC 898 at 907). [32] Another class of case where equity will intervene is to " … [restore] to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them." (Baumgartner v Baumgartner (1987) 164 CLR 137 at 148). The characteristics of a constructive trust which arises on this basis were explained by Campbell J in West v Mead [2003] NSWSC 161 at [52]-[64]. His Honour said (at [59]): … a plaintiff needs to establish there is indeed a joint endeavour between the parties, in which expenditure is shared for the common benefit. It is also necessary to identify what the scope of that joint endeavour is … Further, for any couple, the scope of the joint endeavour they are engaged in might change from time to time. If, within the scope of a joint endeavour … an asset is acquired, as a result of contributions both parties have made, and for a purpose of the ongoing joint endeavour of the parties, this gives rise to the presumption that the beneficial interest ought be shared equally. That presumption can be displaced if one party is able to show that the contributions, both financial and non-financial, to that asset should be regarded as unequal. [33] The imposition of such a trust does not depend on the actual or presumed intention on the part of the prospective trustee to hold property on trust. Baumgartner v Baumgartner was significant for its expansion of the nature of the contributions which may be taken into account in determining the parties' proprietary interests to include non-financial contributions. (Green v Green at 369; West v Mead at [56]). The plaintiff says that the acquisition of the Nora Head property was a joint endeavour between her and the deceased to which each made financial and non-financial contributions. However, more is required to impose a constructive trust on these principles. The joint endeavour must fail, or there must be a premature termination of the parties' joint relationship. (Baumgartner v Baumgartner at 148-149; West v Mead at [64]). In the present case there was no premature termination of the parties' joint relationship or failure of their joint endeavour. I do not consider that the principles established in Baumgartner v Baumgartner and applied in Hibberson v George (1989) 12 Fam LR 725 apply directly in this case. I turn to the claim based on a "common intention" constructive trust. [34] Where a constructive trust is imposed, based upon the parties' common intention as to the ownership of property upon which the claimant has acted to his or her detriment, the inquiry is as to the actual intention of the parties. The law does not impute a presumed intention to the parties based upon what the Court considers fair and reasonable persons in the position of the parties would have intended had they turned their minds to the issue. (Pettitt v Pettitt [1970] AC 777 at 804, 810, 816-817; Gissing v Gissing [1971] AC 886 at 900, 902, 905-909; Allen v Snyder [1977] 2 NSWLR 685 at 690, 698, 701). [35] It is unnecessary to enter the debate as to whether a trust based on the parties' common intention is properly characterised as a constructive trust, or whether it should be characterised as an express trust which is enforceable notwithstanding the want of writing as it would be an equitable fraud for the legal owner to rely on the absence of writing to deny the beneficiary's interest. (Allen v Snyder at 692-3; 699). In later cases, eg Grant v Edwards [1989] Ch 638; Maharaj v Chand [1986] AC 898 at 907; Green v Green (1989) 17 NSWLR 343; Brandling v Weir [2003] NSWSC 723; Parianos v Melluish (2003) 30 Fam LR 524, this class of trust has been classified as a constructive trust, even though it is based on the parties' actual intentions, rather than imposed despite their intentions. [36] The intention to be established need not be that the parties have a specific share of the property. It is sufficient that they intend that the claimant should have a beneficial interest or "some form of proprietary interest". (Green v Green at 355, 356; Grant v Edwards at 654; Parianos v Melluish at [31], [39]). [37] The intention may be established in various ways. There may be an agreement between the parties as to how the property should be held. There may be express statements as to their intention. Their intention may be inferred from their conduct. The question of what acts demonstrate an agreement or common intention referable to the beneficial enjoyment of the property is one of evidence, not law. (Allen v Snyder at 691; Green v Green at 355). A common intention that a party have a beneficial interest in a property owned by another will not be inferred merely from their joint occupation of property, nor the carrying out of household duties, nor the bringing up of children on the property, nor the doing of repairs, renovations, maintenance, decoration or improvement, nor the provision of furniture. (Pettitt v Pettitt [1970] AC 777 at 805-6, 811, 818, 826; Gissing v Gissing [1971] AC 886 at 900, 910; Burns v Burns [1984] Ch 317 at 326, 328, 342). [38] The intention may be inferred from financial contributions, direct or indirect, to the acquisition of property, including the paying off of mortgages, or the payment of expenses which free up funds for that purpose. (Burns v Burns at 328-329; Gissing v Gissing at 900, 902-3, 906-907; Grant v Edwards at 647, 648-9, 653-4, 655; Green v Green at 355). This is a wider enquiry than whether a contribution was made to the purchase money such as to give rise to a presumption of a resulting trust. Whilst both enquiries address the inferences to be drawn as to the parties' actual intentions, a contribution to the purchase price creates a presumption of beneficial ownership in the proportion which the amount contributed bears to the price. For a "common intention" constructive trust, a contribution, direct or indirect, to the costs of acquisition of the property is a matter from which an intention that the claimant have a beneficial interest in the property might be inferred. There is a difference between a fact from which an inference can be drawn, and a fact from which a rebuttable presumption arises. The significance of the difference will depend upon the strength of the presumption. In the case of the "common intention" constructive trust, there is no presumption that the beneficial interest is in proportion with the contribution to the purchase price. [39] Other evidence from which conclusions may be drawn about the intentions of the parties include declarations of the parties before or at the time of the transaction or so close in time after the transaction as to constitute a part of it. Subsequent declarations of intention are only admissible against interest. (Calverley v Green (1984) 155 CLR 242 at 262 and 269; Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 365; Bryson v Bryant (1992) 29 NSWLR 188 at 215). [40] The plaintiff must also show that she acted to her detriment in a way referable to the agreement or intention that she have an interest in the property. (Austin v Keele (1987) 10 NSWLR 283 at 291; Grant v Edwards at 648; Carruthers v Manning [2001] NSWSC 1130 at [124]). Conduct which is insufficient to establish a common intention as to the ownership of the property may be sufficient to constitute relevant actions to the plaintiff's detriment to establish a trust if the common intention is established otherwise. Conduct may be both the evidence from which an intention that the plaintiff have a beneficial interest can be inferred and the act of detrimental reliance. (Green v Green at 355; Grant v Edwards at 647, 652, 655). In Grant v Edwards Nourse LJ said (at 648) that to qualify as acting on the common intention, the conduct must be such that the plaintiff could not reasonably have been expected to embark upon it unless she were to have an interest in the property. In Green v Green (at 357) Gleeson CJ, with whom Priestley JA agreed, approved a less stringent test taken from the judgment of Sir Nicholas Browne-Wilkinson VC in Grant v Edwards (at 657) that: … once it has been shown that there was a common intention that the claimant should have an interest in the house, any act done by her to her detriment relating to the joint lives of the parties is, in my judgment, sufficient detriment to qualify. The acts do not have to be inherently referable to the house … The holding out to the claimant that she had a beneficial interest in the house is an act of such a nature as to be part of the inducement to her to do the acts relied on. Accordingly in the absence of evidence to the contrary, the right inference is that the claimant acted in reliance on such holding out and the burden lies on the legal owner to show that she did not do so …
The plaintiffs have not submitted that Ms Gulliver and her husband had a common intention that the husband would have an equitable interest in the Riverview property. Nor have they suggested that there was some common endeavour between Ms Gulliver and her husband that has broken down without the fault of either. So far as the evidence suggests, the marriage between Ms Gulliver and her husband is subsisting, so the time has not even come when the husband could assert some form of constructive trust, or seek some other equitable remedy, in relation to the Riverview property.
The Court cannot find that there is a serious case to be tried that the plaintiffs have a charge over an equitable interest to which Mr Gulliver is entitled in the Riverview property arising as a result of a constructive trust if the plaintiffs do not even assert facts and circumstances recognised in equitable principle as being capable of establishing the existence of a constructive trust.
Consequently, I am of the view that the Court should make an order requiring the plaintiffs to withdraw the caveat over the title to the Riverview property.

Balance of convenience favours withdrawal of caveat

It is appropriate, nonetheless, that the Court makes some observations concerning the balance of convenience.
The plaintiffs submitted that the balance of convenience favours permitting the caveat to remain on the title, because, if it is ordered to be withdrawn, Ms Gulliver may enter into some transaction concerning the Riverview property which destroys the possibility that the plaintiffs will be able to establish a charge over an interest in the Riverview property to which Ms Gulliver's husband is entitled. Secondly, the plaintiffs said that, notwithstanding that the caveat has been lodged against the title to the Riverview property for some 2 1/2 years, Ms Gulliver has not been able to show that she has suffered any damage as a result. Thirdly, the plaintiffs said that Ms Gulliver had not tendered any positive evidence that she had taken any step necessary to enable her to renovate the property, or to refinance her mortgage.
The first, and obvious, response to the submissions is that the plaintiffs have had more than enough time, since the caveat proceedings were commenced on 18 March 2019, to prepare their claim for hearing and to have secured a hearing date. Yet the plaintiffs had to say to the Court that they could not comply with Darke J's order that the claim be determined on 16 October 2020, because they had prepared absolutely no evidence to support their claim.
More significantly, however, I do not think that a registered proprietor of property such as Ms Gulliver must necessarily establish an immediate risk of damage, in order to justify the Court in ordering the withdrawal of the caveat. The question depends upon the strength of the caveator's claim for the maintenance of the caveat, which in turn depends upon the Court's view of the likelihood that the caveator will establish, at a final hearing, the existence of the interest in the property protected by the caveat.
I have found in this case that the plaintiffs have not demonstrated any likelihood of establishing the interest in the Riverview property that they claim. If that conclusion is wrong, the basis of the plaintiffs' claim is extremely weak.
In such cases as this, the Court should give substantial weight to the mere fact that a registered proprietor is entitled to have the title free from any blot which interferes with their right to use the property in any way permitted by the law.
This is not a case where the plaintiffs' claim is sufficiently strong that the most the Court would do is to order the plaintiffs to withdraw the caveat, to enable Ms Gulliver to refinance her mortgage, on the basis that the plaintiffs would then be permitted to lodge a further caveat to protect their unregistered interest in the Riverview property.
There is force in Ms Gulliver's submission that it is not realistic for the Court to require her to provide positive proof, in advance, of how her attempts to refinance her mortgage will be impeded by the existence of the caveat. Ms Gulliver submits that there is a real chance that potential lenders will be put off by the fact of the caveat during the course of any negotiations, and of the potential consequences of the plaintiffs prosecuting the claim against Ms Gulliver. The fact of the caveat remaining on the title is likely to lead to the situation where Ms Gulliver has to inform potential lenders that the plaintiffs claim a charge over her property to secure the amount of $313,131.27, plus an unquantified amount of interest, on the basis of an exotic constructive trust that may only be established after contentious litigation.
Ms Gulliver is simply entitled in the present circumstances to be free from the statutory injunction constituted by the caveat that has created a serious blot on her title.
I also accept Ms Gulliver's submission that the caveat is defective in that it is not limited to preventing Ms Gulliver from dealing with Mr Gulliver's alleged interest in the Riverview property: see Andrews v Wilcox [2008] NSWSC 280. The caveat prevents Ms Gulliver dealing with her interest in the Riverview property as well. That proposition highlights the fact that the plaintiffs have not, in the caveat, the summons in the caveat proceedings, the statement of claim in the debt proceedings, or at the hearing, identified the nature and extent of Mr Gulliver's alleged interest in the Riverview property, either sufficiently or at all. That reflects the fact that, because of the insufficiency of evidence, the plaintiffs have not been able even to identify the actual extent of the interest by constructive or resulting trust that Mr Gulliver might be entitled to claim.
As mentioned above, the plaintiffs acknowledged that there was a defect in the caveat by reference to the erroneous date for the factoring agreement between the second plaintiff and the debtor and Ms Gulliver's husband.
If the plaintiffs' claim had otherwise been sufficiently strong to warrant the protection of the caveat, I may have permitted the plaintiffs to lodge a new caveat pursuant to s 74O of the Real Property Act 1900 (NSW) to protect the interest that they claimed. For the reasons given above, it is not necessary for the Court to consider that course.

Orders

Consequently, the orders of the Court in the caveat proceedings are: 1. Order that the plaintiffs forthwith take all steps necessary to cause the caveat to be withdrawn from the title to the Riverview property. 2. Order the plaintiffs to pay the defendant's costs of the caveat proceedings.
The orders that are actually entered will contain the details necessary to perfect these orders by identifying the caveat and the title details of the Riverview property.
Additionally, the following orders will be made in the debt proceedings: 1. Order the plaintiffs to pay the costs of the third defendant by reason of the Court being unable to hear and determine the proceedings on a final basis at the hearing fixed on 16 October 2020 by reason of the plaintiffs not being ready for the proceedings to be heard. 2. Order that the costs payable under Order 1 be paid on the indemnity basis.
I will make further case management orders in both the caveat and the debt proceedings in due course.

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: 30 October 2020

(1989) 12 Fam LR 725

(2003) 30 Fam LR 524

At a glance

Court

Decision date

Before

Source

Judgment (12 paragraphs)

Legislation Cited (1)

Cases Cited (19)

Cited By (1)