Williamson v Scarano

Deabel v V'Landys [2002] NSWSC 438 CASES CITED : ICM Agriculture Pty Ltd v Young [2009] FCA 109 Glew v Harrowell of Hunt & Hunt Lawyers [2003] FCA 373

PARTIES : Plaintiff: David Williamson Defendant: Vince Scarano

COUNSEL : Plaintiff: B Ilkovski Defendant: D E Baran

SOLICITORS : Plaintiff: Mills Oakley Lawyers Defendant: Jacovou & Co

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY JUDGE LIST

2010/257420 David Williamson v Vince Scarano JUDGMENT 1 HIS HONOUR: This is an application pursuant to s 74K(2) of the Real Property Act 1900 (NSW) to extend the operation of a caveat lodged in relation to land in Ermington. 2 In the caveat the plaintiff claims an interest in the following terms: " Equitable interest in the land as beneficiary under a constructive trust or an equitable chargee. " 3 The facts upon which that interest is claimed are described in the caveat as follows: " The facts on which the Caveator's claim is founded for an equitable interest as beneficiary under a constructive trust or as an equitable chargee are that the Registered Proprietor made an oral statement to the Caveator to the effect that the Caveator would have an interest in the land if he made monetary contributions to the Registered Proprietor to be applied to reduce the mortgage over the land. Encouraged by the Registered Proprietor's statement and acting in the belief that he would have an interest in the land, the Caveator made monetary contributions to the Registered Proprietor, and made both monetary and non-monetary contributions improving the land. The extent of the Caveator's interest and/or charge is not readily ascertainable but is co-existive with the value of the monetary and non-monetary contributions made by the Caveator. "

4 In support of the application the plaintiff read an affidavit of his solicitor, Mr Refenes. Mr Refenes deposed that the defendant is the registered proprietor of the property and was the plaintiff's father-in-law. He attached a title search of the property and a copy of the caveat. He also attached to his affidavit correspondence in which he stated that the plaintiff claimed a beneficial interest in the property and requested an undertaking from the defendant not to deal with the property. That undertaking was not given. Mr Refenes also annexed to his affidavit the statement of claim the plaintiff has filed in these proceedings, and gave evidence of the service of the lapsing notice. That is the extent of the plaintiff's evidence on the application. That is to say, no affidavit has been relied upon, save for the affidavit verifying the statement of claim setting out the facts said to give rise to the caveatable interest. 5 The only potential qualifications to this is that the plaintiff also relies upon the statutory declaration, which forms part of the caveat, in which the plaintiff's solicitor, Mr Refenes, declared that to the best of his knowledge, information and belief the plaintiff had a good and valid claim to the estate or interest set out in schedule 1 to the caveat. The plaintiff relied upon the caveat and statement of claim as evidence to establish that the caveator's claim has or might have substance (s 74K(2)). 6 In Deabel v V'Landys [2002] NSWSC 438 Austin J said (at [10]): " [10] When an application is made for extension of a caveat, the Court regards the caveator as analogous to an applicant for an interlocutory injunction: see Peter Butt, Land Law (4th ed, Lawbook Co, 2001), para2033 and cases there cited. The first requirement is that the caveator must establish that there is a serious question to be tried, that is, an arguable case. It is not enough to show an arguable case on the pleadings, as it were. It must appear to the Court that there is an evidentiary basis for the plaintiff's contentions. But once that is established, it is not necessary or appropriate, in proceedings for extension of a caveat, for the Court to determine on a final basis whether the caveator has made out the estate or interest in land upon which the caveat rests. "

7 In the statement of claim the plaintiff seeks declarations that the defendant holds his interest in the property on trust for himself and the plaintiff in proportions to be determined by the Court, or in the alternative, a declaration that the property is charged for an amount equivalent to the value of the plaintiff's monetary and non-monetary contributions towards the property an interest. He seeks an order for an enquiry as to the value of the plaintiff's interest in, or alternatively the monetary and non-monetary contributions made by the plaintiff, towards the property and for consequential relief. 8 The plaintiff pleads that the defendant purchased the property in or about August 2001. It is common ground that the plaintiff was the defendant's son-in-law at the time of the purchase. The plaintiff alleges that: " 5 Shortly after the Defendant purchased the Property, the Defendant said to the Plaintiff to the effect that: a. it was pointless for the Plaintiff and Angela [the Plaintiff's wife] to pay rent; b. the Defendant had purchased the Property for the Plaintiff and Angela; c. the Plaintiff and Angela should live at the Property; d. if the Plaintiff lived at the Property, he, the Plaintiff, could pay to the Defendant $150.00 per week in lieu of rent; and e. the $150.00 per week to be paid by the Plaintiff would be either applied or taken into account by the Defendant in reducing the mortgage over the Property to the intent that the Plaintiff, by making the weekly payments, would have a half interest in the Property (the Representation of Attaining a Half Interest in the Property ). Particulars The Representation of Attaining a Half Interest in the Property was express, oral and made in a conversation between the Plaintiff and the Defendant at the Property in or about August 2001. "

9 The plaintiff also alleges that at about the time of the alleged representation pleaded in paragraph 5 the defendant said to the plaintiff that the dwelling on the property needed a lot of work, the plaintiff should do what work he considered necessary to make the dwelling and the property comfortable and liveable, and that the plaintiff and the defendant should share equally the costs of any materials used by the plaintiff for any work to the dwelling and the property. 10 The statement of claim does not allege that the plaintiff incurred any such costs. The plaintiff alleges that following the making of the representations pleaded in paragraph 5 and the defendant's invitation to improve the property, the plaintiff and his wife, in about August 2001, moved out of the rental accommodation and into the home of the plaintiff's wife's mother. It is then alleged between August and November 2001, whilst living at the plaintiff's wife's mother's home, the plaintiff either performed or arranged for work to be performed to the dwelling and to the property. Particulars of the work said to have been performed or arranged to be performed are then provided. The plaintiff then pleads that he, his wife and their son moved into the property in about December 2001. The plaintiff pleads that from August 2001 to about 2003 he paid the defendant $150 per week and from 2003 to 2005 he paid to the defendant $200 per week. He then pleads that in about 2005: " the Defendant said to the Plaintiff, to the effect that: " a. the Plaintiff could perform cleaning work for the Defendant at retail properties owned by the Defendant instead of paying $200.00 per week; b. the cleaning work to the done by the Plaintiff will be valued at $200.00 per week; and c. the Defendant will take into account the $200.00 per week for cleaning work as payment towards reducing the mortgage over the property (the Request to Vary the Method of Contribution to the Property ). "

11 The plaintiff pleads that he acceded to this request and stopped making weekly payments, but from about 2005 to June 2009 he performed cleaning work at retail premises owned by the defendant in Lane Cove and Manly. The plaintiff then pleads that he and his wife separated in December 2008, and that following separation, the plaintiff continued to live at the property and continued to perform cleaning work for the defendant at the defendant's retail premises. He then pleads that in June 2009 the defendant said to him words to the effect that he could cease performing cleaning work and instead pay $300 per week. He pleads that from about June 2009 until 10 May 2010 he did pay the defendant $300 per week. He then pleads that he was given notice to vacate in March 2010 and vacated the property on or about 17 May 2010. The plaintiff pleads that by the making of the representation that he would attain a 50 per cent interest in the property, by the invitation made by the defendant that he improve the property, and by the requests alleged (which are said to amount to variations to the method by which he would contribute to the property), the defendant created an expectation that he would have an interest in the property and encouraged the plaintiff to act in reliance on that expectation. The plaintiff alleges that he acted in reliance on the alleged representations by undertaking the improvement works and by making the payments of $150, $200 or $300 per week, and by doing cleaning work at the defendant's retail premises between 2005 and June 2009. 12 It is alleged that there was common intention between the plaintiff and the defendant that the plaintiff would obtain a half interest in the property, and that in furtherance of that common intention, the plaintiff undertook the improvement works, made the payments and did cleaning work. The plaintiff alleges that by reason of these facts the property is either impressed with a trust or charged in his favour with an amount "coextensive with the value of his monetary and non-monetary contributions towards the Property". 13 In accordance with the Uniform Civil Procedure Rules the statement of claim is verified by the plaintiff. It was verified on 30 July 2010. He deposed: " 1. I am the plaintiff. 2. I believe that the allegations of fact in the statement of claim are true. "

14 The first question is whether the affidavit verifying the statement of claim is evidence on this application of the facts alleged in the statement of claim capable of giving rise to a serious question to be tried that the caveat has or may have substance. A similar question was considered by Lindgren J in the Federal Court in ICM Agriculture Pty Ltd v Young [2009] FCA 109. That was an appeal from a judgment of the Federal Magistrate's Court ordering the setting aside of a bankruptcy notice on the ground that the Court was satisfied that the judgment debtor had a counter claim set off or cross demand equal to or exceeding the amount of the judgment debt that could not have been set up in the proceedings in which the judgment debt was given. On such an application the judgment debtor was required to "satisfy the Court" that there was a prima facie case of the counter claim, set off or cross demand, the establishment of which did not necessarily require the adducing of evidence which would be admissible on a final hearing (Glew v Harrowell of Hunt & Hunt Lawyers [2003] FCA 373 at [8]-[9]). The approach is not materially different from the requirement under s 74K(2) that the Court be satisfied that the caveat or its claim has or may have substance. 15 The only evidence as to the value of the counter claim in the Federal Magistrate's Court was the tender of the statement of claim and the accompanying verifying affidavit. These were admitted as an exhibit. Lindgren J said (at [75] and [76]): " [75] The affidavit was not read before the Federal Magistrate. Although Mr Young's District Court statement of claim and his accompanying verifying affidavit were tendered and admitted (as a single exhibit) before the Federal Magistrate, the affidavit was not read into evidence. Accordingly, for this reason alone there was no evidence of quantum before the Federal Magistrate."

[76] If an attempt had been made to read the affidavit as evidence of any facts under the heading 'Claim for Relief', there would have been an objection and the affidavit would have been rejected. First, the affidavit was nothing more than a statement of Mr Young's 'belief'; his state of belief was not evidence of any of the primary facts, and was not able to satisfy the test discussed in Glew ... Second, and more importantly, if Mr Young had sworn that the allegations of fact in the statement of claim were true, his affidavit would still have been inadmissible because of the nature of the material in the statement of claim. It was an amalgam of conclusions, rather than a statement of facts. "

16 The position is the same in the present case. The affidavit verifying the statement of claim was not separately read. The document that was in evidence was an annexure to Mr Refenes' affidavit. Mr Baran, who appears for the defendant, indicated that he would object to the affidavit verifying the statement of claim if it were read. That objection would be well founded. As in ICM Agriculture Pty Ltd v Young the affidavit verifying the statement of claim deposed to the plaintiff's belief. It did not depose to the truth of the allegations of fact. Moreover, the material in the statement of claim in relevant aspects is also an amalgam of conclusions rather than a statement of facts. The most important allegation is that in paragraph 5(e) quoted above (at para [8]). There is no evidence of what the defendant said to the plaintiff, leading to the allegation that the payments of $150 per week would be applied or taken into account in reducing the mortgage, "to the intent that the Plaintiff, by making weekly payments, would have a half interest in the Property". 17 Likewise there is no evidence as to what was said which provides the foundation for the allegation that the defendant invited the plaintiff to do work to improve the property. Nor is there evidence of what work the plaintiff performed. The allegation in paragraph 8 of the statement of claim is that the work (which was there particularised) was either performed by the plaintiff, or that he arranged for the work to be carried out. 18 That deficiency in the evidence itself prevents my being satisfied that the caveator's claim has or may have substance. 19 I should add that the defendant has sworn an affidavit in which he denies having ever promised the plaintiff a share of the property or any equity in the property. He says that he did not make any such promise even for his daughter. The defendant in his affidavit does depose to the fact that the plaintiff carried out work to the property. He says that, without his knowledge, the plaintiff gutted the internal part of the property, and that the plaintiff did most of the manual labouring work on the property when improvements were carried out. He deposes that he paid all the costs and expenses, including the costs of all materials and all the costs of contractors and tradesmen. There is no contrary evidence. 20 Even if I could treat the facts alleged in the statement of claim as being established by evidence the plaintiff would still face considerable difficulties. The gist of the case as pleaded, as I apprehend it, is that the plaintiff paid money, occupied the property and did work both to the property and for the defendant in reliance on the representation that by making weekly payments he would have a half interest in the property. 21 The caveat does not assert an interest as a 50 per cent beneficial owner of the property. Nor is that included in the relief claimed. The caveat asserts an equitable interest, which is said not to be readily ascertainable but was co-extensive with the value of the plaintiff's monetary and non-monetary contributions. 22 The claim appears to be a claim based on a "common intention" constructive trust. Such a trust may be established, even though it is not established that the parties had a common intention that the putative beneficiary have a specific share of the property. Nonetheless, for such a trust to be established it must be shown that the parties agreed, or it was their common intention, that the claimant should have an interest in the property owned by the other, and that the claimant acted to his or her detriment on the basis of that agreement or common intention. Intention may be inferred from financial contributions made directly or indirectly to the acquisition of property, including paying off mortgages or the payment of expenses, which free up funds for that purpose. 23 Here the evidence is lacking of any such agreement or common intention. The payments that the plaintiff alleges he made are described in the statement of claim as being payments in lieu of rent. It is unlikely that any such common intention that the plaintiff would have a proprietary interest in the property would be inferred from the making of such payments. 24 The defendant has annexed to his affidavit an advice from a mortgage broker addressed to the plaintiff advising of a loan approval for $400,000 for the purpose of the plaintiff purchasing the subject property. The defendant deposes that in September 2009 he told the plaintiff that he would have to leave his property as the defendant needed to sell it. The plaintiff asked if he could buy the property. The defendant deposed that he indicated his willingness to sell the property to the plaintiff for $440,000. It was in these circumstances that the plaintiff provided him with a copy of the letter from the mortgage broker, which is dated 7 October 2009, together with a handwritten unsworn statutory declaration concerning the value of the property. The plaintiff has not sought to explain these matters. Prima facie they corroborate the defendant's evidence that the plaintiff sought to purchase the property from the defendant in 2009, which seems to be inconsistent with the plaintiff's present position that he is a part beneficial owner of the property. In other words, if it were possible to treat the allegations in the statement of claim as facts of which there is evidence by reason of the affidavit verifying the statement of claim, it could not be said that the plaintiff's claim is one of apparent prima facie strength. 25 In those circumstances it would have been necessary to consider the balance of convenience. Critical to that would be the plaintiff's undertaking as to damages in the event that the caveat were extended, but it was ultimately found that the plaintiff was not entitled to the relief sought. The plaintiff seeks to prevent the defendant from selling the property unless substitute security is provided. The presence of the caveat on the title may have a depressing effect on the ability of the defendant to market the property. There would be a real prospect that the defendant might suffer loss if the caveat is extended. Whilst the plaintiff has offered an undertaking as to damages, he has adduced no evidence of his ability to satisfy such an undertaking. The evidence of the defendant suggests that the plaintiff does not have extensive resources. In the circumstances I would have not considered that the balance of convenience would have warranted the making of the order to extend the caveat. 26 For these reasons I order that the plaintiff's notice of motion filed on 17 August 2010 be dismissed. I order that the plaintiff pay the defendant's costs of and incidental to the notice of motion.

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