18. Registered mortgagee defeats caveat based on alleged trust – Whether repeat caveat

National Australia Bank Limited v Nilsen & Anor [2018] VSC 368
(2 July 2018) Kennedy J.

The chronology was –

• The plaintiff had a registered mortgage over land of which the registered proprietor was Petrina Pavlic. 

• She died, her son William was her sole beneficiary, he obtained letters of administration and a new loan from the plaintiff with the mortgage as security.  He defaulted and became bankrupt.

• The first defendant, who was William’s current or former de facto partner, caveated claiming an implied, resulting or constructive trust.

• In 2017 a consent order of the Family Court was made between her, William and his trustee in bankruptcy providing for the transfer of the property to her contemporaneously with payment of $550,000 by her by 5 October 2017, with liberty to the trustee to sell in default of such payment.  No payment was made.

• The plaintiff initiated a sale of the land to a third party with settlement due in May 2018 but subsequently extended to 4 July 2018

• On 4 June 2018 a judge ordered that caveat be removed.

• On 8 June 2018 the defendant again caveated on the same grounds as the first caveat. 

• The plaintiff commenced further removal proceedings under the Transfer of Land Act s. 90(3).  The defendant argued that she had an interest pursuant to the Family Court Order which was different from, and arose subsequent to, the interest relied upon for the first caveat (which had been based on alleged contributions).  Shealleged, without evidence, that the trustee in bankruptcy had agreed to extend the time for her to pay the money to obtain the land and that this ongoing indulgence gave rise to a trust.

Kennedy J ordered removal of the caveat, holding –

1. There was no serious question to be tried.  The Family Court order did not create any interest in the land in circumstances where no money had been paid.  In any event the bank’s interest as registered mortgagee defeated any unregistered interest. [27]-[28]
2. The following balance of convenience factors also favoured removal –
   • The interests of the innocent purchaser;
   • Delay in disposing of the property;
   • The caveator had not commenced proceedings to substantiate her claim;
   • If she had a cause of action the caveator could sue the bank for damages;
   • The caveator had not paid the money ordered by the Family Court and there was no evidence of her capacity to do so;
   • Sale was the best chance of reducing the amount of approximately $2.7 m. owed. [31]-[40]
3. The plaintiff also argued that s. 91(4), which provided that a lapsed or removed caveat shall not be renewed by or on behalf of the same person in respect of the ‘same interest’, was breached. Her Honour did not deal finally with this argument but stated that the better view appeared to be that this section did not apply because the source of the second caveat was the Family Court Order which postdated the first caveat.

 

Comment:

1. As to her Honour’s statement that “The Family Court order did not create any interest in the land in circumstances where no money had been paid as provided for in that order” –

There is authority that a Family Court order can create an interest in land: Bell v Graham [2000] VSC 142 at [19]. However her Honour’s statement is authority for a different view if no money has been paid pursuant to the order. Presumably, however, if it had been paid the payor would have a lien giving rise to a caveatable interest: see eg SixBruce Pty Ltd v Milatos [2017] VSC 784 (See my earlier blog here)

2. The fact that the sources of the two caveats was different did not mean that they were not in respect of the same interest: Layrill Pty Ltd v Furlap Constructions Pty Ltd[2002] VSC 51 at [9].