Western Pacific Developments Pty Ltd (in liq) v Murray [2000] VSC 436

"Pursuant to a constructive trust created between the registered proprietor, Western Pacific Developments Pty Ltd and the caveator, Basil James Murray, on 14 December 1999."

12. His reason for doing so is set out in his affidavit of 15 May 2000, the relevant paragraphs of which read:

"(3) In May 1999, I had a discussion with Mr Thompson (Mr Thompson being a Director of Western Pacific) about the outstanding monies owed to me and he said that "if you stick by me as you have over the years and continue doing the excavation work and other jobs, I will guarantee that when the Creswick Street apartments are settled, you will be paid immediately after the bank'. He repeated this promise to me on numerous occasions between May and December 1999. I would not have continued performing work for the plaintiff if Mr Thompson had not made such promises. (4) On 14 December 1999, I again spoke to Mr Thompson and during our conversation, we agreed that if I didn't seek the monies owed until the sale of the Creswick units, then I would have an interest in those units. It was our joint understanding that this was the case"

16. Having regard to the grounds of claim in the defendant's caveat, it would seem to me that paragraph (3) of his affidavit has little relevance.

19. The units have now been sold by the liquidator for a total of $1,950,000, and settlement of the sale is scheduled to take place tomorrow. Hence the urgency of the liquidator's present application.

22. It was not contended by counsel for the defendant that the agreement of 14 December amounted to the oral grant of a mortgage or charge. If that had been the basis upon which the defendant sought to justify his caveat, the short answer would have been that any such mortgage or charge was unenforceable by reason of s.126 of the Instruments Act 1958. Rather, what was argued on the defendant's behalf was that the agreement created an equitable lien giving rise to a constructive trust. In that regard his counsel placed significant reliance on the following passage in the judgment of Deane, J. In Hewett & Ors v. Court & Anor [1983] HCA 7; (1983) 149 CLR 639 at 668:

"I do not propose to essay that task here. It is adequate for present purposes that I identify what I consider to be the circumstances which are sufficient for the implication, independently of agreement, of an equitable lien between parties in a contractual relationship. Those circumstances have, to some extent, been indicated in what has been said above. They are: (i) That there be an actual or potential indebtedness on the part of the party who is the owner of the property to the other party arising from a payment or promise of payment either of consideration in relation to the acquisition of the property or of an expense incurred in relation to it; (ii) That that property (or arguably property including that property) be specifically identified and appropriated to the performance of the contract; and (iii) That the relationship between the actual or potential indebtedness and the identified and appropriated property be such that the owner would be acting unconscientiously or unfairly if he were disposed to dispose of the property (or if it be appropriate, more than a particular portion thereof) to a stranger without the consent of the other party or without the actual or potential liability having been discharged".

26. As His Honour made clear, what His Honour was dealing with there was the implication of a lien independently of any agreement. It is the defendant's case that here we have an agreement. But if one applies the principles stated by Deane, J. to the facts in this case, it is my opinion that this case does not fall within them.

29. Western Pacific's indebtedness does not arise from the payment or promise of payment either of consideration in relation to the acquisition of the property or of an expense incurred in relation to it. I say that because it is not clear if some of Western Pacific's present indebtedness related to work done by the defendant on the Creswick Street site. The defendant has sworn that between January and November 1999 he did excavation work at various sites for Western Pacific, the total cost of which was $53,944. He has been paid $27,516 in respect of that work leaving a balance of $31,428.

32. As the work done at Creswick Street was done in December 1998 (see paragraph (2) of the defendant's affidavit) it could well be the situation that he was paid for that work and that the balance outstanding is in respect of work done elsewhere during 1999. If that is the situation, then the third requirement stipulated by Deane, J. is also not met, that is, that the relationship between the actual indebtedness and the property be such that Western Pacific would be acting unconscientiously or unfairly if the liquidator were to dispose of the property.

35. For the reason I have stated I am not satisfied that there is such a relationship. Nor, in my opinion, is the liquidator acting unconscientiously or unfairly in selling the units.

38. But does the agreement relied upon by the defendant create a lien? I do not believe that it does. If properly construed, it amounts, in my +opinion, to no more than a statement that the defendant will be paid the sum owed to him out of the proceeds of the prospective sale of the units. The proceeds of a prospective sale of land will not support a caveat; cf. Epples v. Wilson [1972] VicRp 50; (1972) VR 440 at p. 443.

41. But there are more significant hurdles in the defendant's path in this case. It is clear that the agreement relied upon by the defendant was reached when Western Pacific was insolvent (see paragraph (16) of the liquidator's affidavit sworn 7 May 2000) and reached within the six month period of the relation back day under the Corporations law. In that situation the defendant received a preference which is a voidable transaction under s.588FE(2) of the law.

44. Further, it is strongly arguable that the agreement of 14 December was an uncommercial transaction within the meaning of s.588FB of the law, and if that be so, is again voidable under s.588FE(3).

47. Finally, even if I was satisfied that there was a serious issue to be tried in the proceeding, nevertheless, I would have ordered that the caveat be removed. The debt owed to the defendant by Western Pacific is $31,428, the value of the units $1,950,000. I consider that great inconvenience would be caused to Western Pacific's liquidator if he was unable to effect a settlement of the sale of the units tomorrow.

50. On the other hand, the defendant has known since at least 25 March that the liquidator had sold the units and was demanding the removal of the caveat, yet he has still brought no proceeding seeking a declaration that he has a secured interest in the units to secure payment of his debt.

53. The Registrar of titles is ordered pursuant to s.93 of the Transfer of Land Act 1958 to remove Caveat No.541388R from the land in Certificate of Title Volume 10483 Folios 210 and 211.

56. I order that the defendant pay the plaintiff's costs of the application including any reserved costs.

60. It is submitted on behalf of the plaintiff that the order for costs made against the defendant in this case should be on an indemnity basis.

63. I think the first thing to say about the defendant's case in support of his caveat was that it is, and for the reasons I have previously stated, quite hopeless, and was bound to fail.

66. The defendant was left in no doubt about the nature of the plaintiff's case nor was he in any way taken by surprise by the nature of the case because it was spelt out to his solicitors in some detail in the letter of 31 March 2000 sent to them by the plaintiff's solicitors.

69. Indeed, as I pointed out during the course of discussion, on 24 March or thereabouts, in a telephone conversation between the solicitor for the liquidator, that is, the then solicitor for the liquidator, and the solicitor for the defendant, the solicitor for the liquidator was told by the defendant's solicitor that she had advised the defendant to provide a withdrawal of caveat.

72. True it is that in the reply written by her to the liquidator's then solicitor on 27 March 2000 appears the paragraph, "We advised Mr Murray last week of the costs of defending an application to remove the caveat and on that basis advised him to remove it but he wishes to proceed."

75. And proceed he did, that is, he proceeded to maintain the caveat knowing that the two units had been sold for a substantial sum of money, whereas the debt he alleges Western Pacific owed to him was, by comparison, modest.

78. The liquidator, of course, was left with no alternative but to pursue his application to have the caveat removed because settlement of the two units, of course, is scheduled for tomorrow and, if settlement does not take place, there is always the risk that one or both of the purchasers involved may rescind their contracts.

81. In the circumstances of this case, I do consider that there are special circumstances which justify making the order sought. Accordingly, I order that the costs the defendant is to pay to the plaintiff will be on an indemnity basis.

85. The formal order will be that the defendant pay all costs of the plaintiff in respect of the application filed on 14 April 2000 except insofar as they are of an unreasonable amount or have been unreasonably incurred and so that subject to the above exceptions the plaintiff will be completely indemnified by the defendant for its costs.

89. I think that the liquidator is entitled to be totally indemnified for his costs. After all, he is an officer of the court; he is acting in the best interests of the creditors of the company and I think the order is satisfactory.

92. I direct the Prothonotary to authenticate the order forthwith.