Warner v Andrews

Judgment (ex tempore) 1By summons filed on 3 June 2011 the plaintiff John William Warner claims an interlocutory order extending the operation of caveat AF889354 in respect of the property comprised in folio identifier 6/SP80795 until further order of the Court. The summons states no claim for final relief, although it is apparent from the evidentiary material, and confirmed by Ms Cotter-Moroz who appears for the plaintiff today, that the claim is for a declaration that the plaintiff has a beneficial interest in the subject property as tenant-in-common with the defendant Alison Jean Andrews, by way of resulting trust arising from contribution of part of the purchase moneys. On 6 June 2011, by consent and upon the plaintiff giving to the Court the usual undertaking as to damages, the Court granted an interim extension of the caveat until 17 June 2011, and adjourned the proceedings to today to enable the application to be heard, if required, on an interlocutory basis. 2The caveat claims an interest described in the following terms: An equitable interest as tenant in common with the registered proprietor of an undivided three-fifths share of an estate in fee simple. 3The equitable interest is said to arise by virtue of "payment of $373,000 as part of the purchase price". The defendant served a lapsing notice on 17 May 2011. 4On an application for extension of the operation of a caveat, a test substantially the same as that for an interlocutory injunction applies: First, the applicant must demonstrate that the caveat has or may have substance, the phrase "may have substance" encompassing the concept of a seriously arguable case; secondly, the Court will have regard to considerations of the balance of convenience and prejudice; and, finally, the Court will have regard to other relevant discretionary considerations. 5The starting point is whether the caveat has or may have substance. The plaintiff's evidence is to the effect that he was living with the defendant when, in mid 2009, she sold her former property at Belrose and purchased the subject unit at Narrabeen; that the Belrose property was sold for $860,000 and Narrabeen was purchased for $1,100,000; that the Belrose property was the subject of a mortgage to IMB, securing a sum of $521,000; that the IMB mortgage was effectively "rolled over" on the simultaneous completion of the sale of the Belrose property and the purchase of the Narrabeen unit; that the defendant contributed her remaining equity in the property and the amount secured by the IMB mortgage to the purchase of the Narrabeen property; and that the plaintiff contributed sums totalling about $376,000, comprising the deposit paid on exchange of $105,000, stamp duty of $46,000, the balance purchase moneys of $225,000, and conveyancing costs of $1,400. In due course there may be an issue as to whether amounts paid for stamp duty and legal fees are counted as a contribution to the purchase price, there being conflicting authorities on that question [see, for instance: Currie v Hamilton [1984] NSWLR 68, 69 (McLelland J); Ryan v Dries [2002] NSWCA 3, [52]-[53] (Giles JA); Shepherd v Doolan & Ors [2005] NSWSC 42, [24] (White J); and compare the approach in Little v Little (1988) 15 NSWLR 43, 45 (Bryson J)]. 6The plaintiff annexes to his affidavit a number of bank statements of a company, Unisource Australia Pty Limited, which evidences the withdrawal from its accounts of the sums to which I have referred. He says he is the sole director, secretary and shareholder of Unisource, which provided the source of funds for those payments. It is in such circumstances, on this type of application, a more than reasonable inference that his company advanced him those sums on loan account. 7It is, of course, trite law that, where a party other than the nominal purchaser contributes part of the purchase price, the property is presumed to be held upon a resulting trust for the nominal purchaser and the other contributor beneficially, in proportion to their respective contributions [ Calverley v Green (1984) 155 CLR 242]. 8The defendant has filed and read an affidavit of some 65 paragraphs. It contains not a word to deny the plaintiff's allegations of contribution to the purchase price, and no alternative explanation of how the purchase price was funded. Subject to the qualification that the caveat claims a three-fifths beneficial interest, where in fact the appropriate proportion, having regard to the evidence, is more like one-third, it is manifestly established that the caveat may have substance. 9So far as that discrepancy in respect of the proportionate interest claimed is concerned, (NSW) Real Property Act 1900 , s 74L, provides that the Court shall disregard any failure of the caveator to comply strictly with the requirements of Part 7A and of any regulations made for the purposes of the Part with respect to the form of the caveat. This provision allows the court to overlook misdescriptions, so long as the caveator has a caveatable interest [ Windella (NSW) Pty Ltd v Hughes (1999) 49 NSWLR 158, 162]. While the caveat overstates and, therefore, does not precisely describe the extent of the interest claimed by the plaintiff, in substance, in claiming an equitable interest as tenant in common with the defendant arising from contribution to the purchase price, it discloses a viable caveatable interest. The overstatement of the quantum, in the circumstances of this case, does not vitiate its validity. 10Turning to the balance of convenience, I accept that, where there is a seriously arguable - or even indisputable - caveatable interest, the Court nonetheless retains a discretion, based on the balance of convenience, as to whether or not it will maintain the caveat or permit it to lapse. Thus, the circumstance that a caveator has or may have a caveatable interest is a necessary but not a sufficient condition that the caveat will not be removed, and the Court may order its withdrawal, even where the caveat is indisputably valid, where the balance of convenience favours that course ( Buchanan v Crown & Gleeson Business Finance Pty Limited [2006] NSWSC 1465, [8] (Brereton J); Australian Property & Management Pty Ltd v Devefi Pty Ltd (1997) 7 BPR 15,255; and Esther Investments Pty Ltd v Wilson International Pty Ltd [1982] ANZ ConvR 647). 11The circumstances in which such a course may be appropriate include where a party, applying for the removal of a caveat, has an interest in the land superior to that of the caveator - particularly where that party is being prevented by the caveat from a legitimate exercise of its rights. Thus, a caveat by an unregistered second mortgagee will be removed if it is preventing the registered first mortgagee from exercising its power of sale with a clear title. A valid caveat may also be removed by the Court if it prevents the registered proprietor from the legitimate exercise of a right in respect of the land, including a proper sale or refinance. But a highly relevant consideration is whether the removal of the caveat will derogate from the caveator's claim and it is a rare case indeed, if there is any, that a valid caveat will be removed for reason of balance of convenience, if that will result in a derogation of priority of the caveator's claim [ Custom Credit Corporation Limited v Ravi Nominees Pty Limited (1992) 8 WAR 42, 50, (Owen J)]. 12In my view, if the priority of the caveator's interests would be adversely affected by the removal of the caveat, it is ordinarily inappropriate to remove the caveat having regard to considerations of the balance of convenience [ Oceanview Group Holdings v Balaz [2006] NSWSC 1469 [10]-[11], (Brereton J)]. 13The defendant's affidavit discloses circumstances of great tragedy and hardship affecting her. In deciding whether the caveat should be maintained or whether some other remedy is appropriate, I have had regard to the circumstance that, assuming the plaintiff were ultimately to succeed - so that, in equity, the parties were tenants in common - the defendant would nonetheless be entitled, pursuant to (NSW) Conveyancing Act 1919, s 66G, to have the property sold and the proceeds divided. Particularly given the circumstance of hardship to which she deposes, there appears no reason to prevent her from proceeding with a sale and from using that portion of the proceeds to which the plaintiff does not have a claim, leaving for argument at a later stage the share of the proceeds to which she has an arguable claim. That mitigates the hardship to the defendant, without jeopardising the plaintiff's claim. Counsel for the plaintiff did not oppose such a course. 14In the light of my earlier indication that I was amply satisfied that there was a serious question to be tried for final relief, and that I would not embrace a course that would jeopardise the plaintiff's priority or proprietary interest, the defendant has proffered, without admission, a proposal that, on settlement of the sale, contracts for which have been exchanged, she will pay into Court or into a controlled moneys account the equivalent of that share of the net proceeds to which the plaintiff has established an arguable claim. Subject to one question about how that share is quantified, that course is acceptable to the plaintiff. It seems to me, therefore that the appropriate course is, rather than extending the operation of the caveat, to grant injunctive relief in terms which will give effect to that outcome. 15The one issue concerns whether an amount of about $73,000, being a second loan from IMB secured on the property, ought to be deducted from the gross sale proceeds, or, at least in the first instance, from the defendant's share. This loan was obtained in about November 2010, nearly eighteen months after the property was purchased. To what purpose the loan moneys were applied is not apparent, save that it appears, on the material presently available, that it was not applied to reduction of the loan that had funded purchase of the property. The proper conclusion at this stage is that it is at least seriously arguable that it was applied not to the property but to the defendant's separate purposes and, therefore, at least arguably ought to be to the defendant's account alone. 16For the foregoing reasons, although I decline to extend the operation of the caveat, instead, I make the following orders: 1.Upon the plaintiff by his counsel giving to the Court the usual undertaking as to damages, order that the defendant be restrained, until further order, from, by herself, her servants and agents, dealing with the net proceeds of sale of the property situate at and known as xxx xxxxxxxxxx xxxxxx Narrabeen in the State of New South Wales, being the land comprised in folio identifier 6/SP80795, after payment of the agent's commission, legal costs of sale and any adjustments on settlement, the reimbursement to the defendant of the sum of $8,870 in respect of paid marketing fees and $11,045 in respect of preparing the property for sale, and payment to IMB of the amount required to discharge loan account 200416200 (presently $521,562.48), but before payment to IMB of the amount required to repay loan 200588678 (presently $73,184.61), except by way of payment into Court, to the credit of these proceedings (or into a controlled moneys account agreed upon by the parties) of 34% of such net proceeds, then payment to IMB of the amount required to repay the said loan 200588678, and then payment of the balance then remaining to or at the direction of the defendant. 2.Order that the proceedings continue on pleadings. 3.Direct that the plaintiff file and serve a statement of claim by 24 June 2011 and that pleadings thereafter continue in accordance with the rules. 4.Adjourn the proceedings to the Expedition List on Friday, 1 July 2011, before the Expedition List Judge. Direct that the defendant file and serve a notice of motion for expedition by 24 June 2011, returnable on Friday, 1 July 2011, together with any affidavit in support of the application for expedition. 5.Reserve liberty to apply on three days' notice, any such notice to specify the relief or directions to be sought. 6.Order that costs of the interlocutory application be the plaintiff's costs in the proceedings. 7.Direct that these orders be entered forthwith.