26. Four disparate cases – (1) Injunction against caveat – (2) Residuary beneficiary and prospective testator's family maintenance claimant with no caveatable interest – (3) Offer of caveat not sufficient security for costs – (4) Failure to remove caveat as breach of mortgage.

This blog deals with 4 cases not warranting a blog in their own right, at times however dealing with arcane points. They are –
R.G. Murch Nominees Pty Ltd v Paul David Annesley & Ors [2019] VSC 107 (26 February 2019) Sloss J. – A further contribution by Mr Annesley, the subject of Blog 4, to the law on injunctions against caveats, he succeeding in this instance.
In the matter of the Will of Dorothea Agnes Baird [2019] VSC 59 (13 February 2019) Keogh J. – A reminder that a residuary beneficiary of an estate does not have a proprietary interest in a specific asset during administration, nor does a prospective testator’s family maintenance claimant have an interest in land in the estate.
Brooklyn Landfill & Waste Recycling Pty Ltd v Commonwealth Golf Club Inc [2019] VSC 52 (6 February 2019) Hetyey JR. – which in short held that the offer by the plaintiff’s director to consent to lodgment of a caveat over her property was insufficient security for costs. [40], [42]
S Pty Ltd v B V [2019] VSC 125 (4 March 2019) Lansdowne AsJ. – which in short, in the course of a much wider dispute, noted that a registered proprietor, who commenced a proceeding for caveat removal but by orders agreed that the proceeding be stayed, was in breach of his obligation under a mortgage to cause a caveat lodged without the consent of the mortgagee to be removed. [34]

R.G. Murch Nominees Pty Ltd v Paul David Annesley & Ors [2019] VSC 107 (26 February 2019) Sloss J.
The facts were:

  • The first defendant (Annesley) was director of a company which owned a rural property mortgaged to a bank. There had been lengthy litigation between the bank and the company.  In August 2018 the bank conducted a mortgagee’s sale at which the plaintiff, whose sole director was Mr Murch (Murch), entered a contract to purchase the property. The contract was settled, the plaintiff became registered proprietor and a mortgage by it was registered.
  • After settlement of the sale there were altercations between Murch and Annesley, allegations of violence by Murch, intervention orders, and the execution by the defendants of a document whereby certain defendants were purportedly appointed to take control of property of the plaintiff for the purpose of enforcing a security interest.
  • The plaintiff brought this proceeding in substance to prevent the defendants interfering with the plaintiff or what it purchased, including seeking an injunction against registering or attempting to register any caveat over the land and certain other land of which the plaintiff was registered proprietor. It relied on the body of past conduct of Annesley in the improperly lodging caveats and similar documents, recorded in judgments of various courts, as manifesting his modus operandi.

As to caveats her Honour found or held –

1.    The plaintiff was in substance applying for a quia timet injunction and so was required to demonstrate a threatened infringement of the plaintiff’s rights sufficiently clearly to justify the court’s intervention.  This application did not arise from previous caveat lodgment over the land but from the defendants’ history. [79]  

2.     Authorities related to quia timet injunctive relief established the following principles –

(a)  the plaintiff must show that what the defendant intended or was likely to do would cause immediate (or imminent) and substantial damage to its property or business.  However, no fixed or absolute standard of proof was required;

(b)  the court would have regard to the degree of probability of apprehended injury, the degree of the seriousness of the injury, and the requirements of justice between the parties. [79]

3.     There being no evidence of the relevant defendants threatening or intending to lodge caveats over the plaintiff’s land, the plaintiff’s apprehension that they may do so did not qualify as an ‘imminent’ threat, and accordingly no injunction would issue. [87]

In the matter of the Will of Dorothea Agnes Baird [2019] VSC 59 (13 February 2019) Keogh J.

The facts were –

·     Dorothea Baird, who had two sons Peter and Michael, was registered proprietor of a property at Rhyll and was also registered as a one third proprietor of a property at Wonthaggi. 

·     On her death Peter obtained probate of her will under which she left her interest in the Wonthaggi property to him, made dispositions of property other than of land, and left the net residue of her estate to both sons equally as tenants in common. 

·    Michael foreshadowed a testator’s family maintenance proceeding.  He also lodged caveats against both properties stating as the grounds of his claim
that he was a beneficiary under the will.

·      Peter brought this proceeding inter alia under the TLA s. 90(3) to remove the caveats.

His Honour held –

1.    That the caveator had not raised a serious question to be tried that he had an interest in the properties.  In particular –

(a) as a residuary beneficiary he did not have a legal or equitable interest in a specific asset of the estate during the course of administration, only a chose in action, or personal right, to compel proper administration of the estate by the executor.  Further, the residue did not come into existence until administration of the estate was complete;

(b) the proposed testator’s family maintenance gave him no interest in the property. [21]-[22]

2.   The balance of convenience also favoured caveat removal. [23]

25. Delinquent lodging of caveat through PEXA – Contrite conveyancer dodges discipline.

Guirgis v JEA Developments Pty Limited [2019] NSWSC 164 (26 February 2019), Kunc J (Supreme Court of New South Wales)

This is the first NSW case dealt with in the caveatsvictoria.blog.  It is a reminder of the care needed in lodging a caveat, specifically here in the context of the Electronic Conveyancing National Law, as denoted in the opening words of the judgment –

“Lodging a caveat is not a trivial act to be undertaken lightly.  It has immediate legal effect and can have significant commercial and financial consequences.  Legal practitioners and licensed conveyancers who advise on, prepare and certify caveats that are lodged electronically have an important role to ensure that obviously unmeritorious caveats are not lodged.  This judgment arises from a failure by a licensed conveyancer to perform that role properly”.

The facts were –

  • The plaintiff and his wife were engaged in Family Court litigation. She was the sole director, secretary and shareholder of the defendant.
  • In December 2018 he entered into a contract for the sale of a property owned by him, with settlement due on 25 February 2019.
  • On 11 February 2019 a caveat was lodged over the land electronically through PEXA. The caveat had been prepared, certified, electronically signed and lodged on behalf of the defendant by a licenced conveyancer, whose company was described on the caveat as the “Responsible Subscriber”.  The estate or interest claimed was a charge, by virtue of an agreement between the defendant and the plaintiff.  Under “Details Supporting The Claim” was “Outstanding loan”.  The caveat also stated certain things to the best of the knowledge of the Subscriber including that the caveator had a good and valid claim to the estate or interest claimed.
  • After his solicitor unsuccessfully attempted to obtain evidence of the alleged agreement from the conveyancer, the plaintiff commenced this proceeding seeking orders under ss. 74MA and 74P of the Real Property Act 1900 (NSW) for the removal of a caveat and for compensation against the defendant.
  • At the hearing on 20 February the plaintiff asserted that he had never entered into any agreement of the kind alleged in the caveat. Mrs Guirgis, who appeared in person, stated that there was no written loan agreement and insofar as there was any agreement it was “a husband and wife agreement” containing nothing giving the defendant a mortgage, charge or other interest in the property.  She acknowledged that the caveat was a negotiation tactic for a Family Court hearing.  The defendant was ordered to remove the caveat with costs.
  • The judge questioned Mrs Guirgis about her dealings with the conveyancer. Mrs Guirgis stated that: she phoned the conveyancer and asked that caveat be lodged; the conveyancer gave no advice about this; and the conveyancer asked whether there was an agreement between the plaintiff and the defendant to which the answer was yes, but the conveyancer did not ask whether it was in writing or oral.
  • His Honour formed a prima facie view that the conveyancer had been delinquent, required the conveyancer to appear to explain why the papers should not be referred to the appropriate body to consider disciplinary action, and on the  conveyancer appearing and apologizing etc (under the heading in the judgment  “The Conveyancer’s contrite explanation”, including “It is the first caveat I have ever put on” [36]) decided to take no further action, but also published his reasons “to make clear how seriously the court viewed the obligations of those who advise  on, prepare and certify caveats” ([5]).

 

His Honour –

  1. Set out at length the NSW statutory provisions on caveats and electronic conveyancing (ie the Electronic Conveyancing National Law). [19]-[28]
  2. Held that the caveat and the conveyancer’s purported certification of it were deficient in at least five respects. [29]
  3. As to the conveyancer’s representation that –

“The Caveator, to the best of the knowledge of the Subscriber identified in the execution of this Caveat document, has a good and valid claim to the estate or interest claimed as specified in this Caveat”.

held that “to the best of the knowledge” conveyed a representation that the conveyancer had a suitable level of knowledge about how an interest in land can arise and had taken reasonable steps to inform himself or herself of the relevant facts so as to be able to express a properly informed opinion. This was also true of the other statements in the caveat said to be “to the best of the knowledge of” the person or entity electronically signing it.   Such statements did not, however, amount to an unqualified warranty of the existence of the relevant state of affairs. [30], [33]

  1. The conveyancer appeared to have lodged the caveat with either a reckless disregard for the conveyancer’s obligations or had failed to meet the standard of care to be expected of a reasonably competent conveyancer certifying a caveat. No reasonably competent conveyancer who had bothered to take proper instructions from Mrs Guirgis would have co-operated in the lodgement of the caveat. [34]
  2. His Honour concluded in part –

“As New South Wales’ conveyancing system moves to a completely electronic platform, the role of conveyancers, solicitors and others as persons qualified to prepare and lodge caveats becomes all the more important.  Ordinary members of the public are, in practical terms, no longer able to lodge caveats without the intervention of a “Subscriber”, who in many cases will be a solicitor or licensed conveyancer.  The requirement to give the requisite representations and certifications operates to confer on them the role of a guardian at the gate”. [39]

Comment.

Victorian cases exposing delinquent lodgment of caveats by legal practitioners are: Legal Services Commissioner v Mercader [2011] VCAT 2062; Pearl Lingerie Australia Pty Ltd v Giarratana [2012] VSC 451; Legal Services Commissioner v Kotsifas [2014] VCAT 1615 (arising from the previous case); Gatto Corporate Solutions Pty Ltd v Mountney [2016] VSC 752.  Space does not permit reference to any other than Mercader, which also arose in the matrimonial context.

In Mercader, on termination of her instructions for a wife in a matrimonial dispute, the solicitor lodged a caveat over the former husband’s property (in which the wife claimed a share) claiming an equitable estate in fee simple “By virtue of constructive trust”.  The notion that the circumstances gave rise to the solicitor having a caveatable interest in the husband’s land was described by Judge Lacava as “a legal nonsense” [27] as was the interest claimed in the caveat [43].  The solicitor was charged with unsatisfactory professional conduct by lodging and/or refusing to withdraw the caveat where she knew and/or ought to have known that she had no caveatable interest and by providing information to the Registrar of Titles that she ought to have known was false.  She was convicted with the question of penalty adjourned.

24. Solicitors breathe a sigh of relief! – Compensation claim under TLA s. 118 – Whether solicitor who lodged caveat liable – Scope of “Any person lodging … any caveat”.

Lanciana v Alderuccio [2019] VSC 198 (28 March 2019), Moore J.

The facts and relevant legislation were –

  • The plaintiff and Bloomingdale Holdings Pty Ltd (Bloomingdale) were equal unitholders in two trusts. The sole shareholder and director of Bloomingdale was Antonio Gangemi.
  • In 2001–2 the trustee of one trust purchased a property and the trustee of the other trust purchased another property.
  • A dispute arose between the plaintiff and Gangemi concerning their business dealings and rights in respect of both properties. The defendants acted as solicitors for Bloomingdale and Gangemi.
  • In 2003 the dispute was settled by an agreement whereby Gangemi’s and Bloomingdale’s interests in both properties would be transferred to the plaintiff or his entities. This transfer to the plaintiff occurred, on which he became solely entitled to the beneficial interest in both properties, and caveats lodged on behalf of Bloomingdale over both properties were withdrawn.
  • However, on 29 March 2005, the defendants as “Alderuccio Solicitors” lodged caveats over both properties on behalf of Bloomingdale as caveator, claiming an equitable estate in fee simple pursuant to a deed of trust dated 25 February 2002 between Bloomingdale and both trustees. The caveats identified “Alderuccio Solicitors” as the address for service of notice and were signed by an “agent being a Current Practitioner under the Legal Practice Act 1996”.
  • The plaintiff alleged that these 2005 caveats caused it loss and damage.
  • The TLA s. 118 provided that –
    “Any person lodging with the Registrar without reasonable cause any caveat under this Act shall be liable to make to any person who sustains damage thereby such compensation as the Court deems just and orders”.
  • The plaintiff sued the defendants alleging that when the 2005 caveats were lodged they knew or ought to have known that Bloomingdale did not have a caveatable interest and could not reasonably have held an honest belief based on reasonable grounds that it had a caveatable interest capable of supporting any caveats.
  • The court heard a preliminary question including whether, assuming the foregoing facts, the defendants were “a person” lodging a caveat for the purposes of s. 118.

His Honour –

1.    Held that the defendants were not such “a person”.  The case contains much statutory analysis going back to the 19th century and reference to cases for this conclusion which it is unnecessary to set out. [5]

2.   Approved the summary of applicable principles under s. 118 in KB Corporate Pty Ltd. v Sayfe and Anor (see Blog No. 9) –

(a)  the applicant must show the caveator had no caveatable interest;

(b)  the applicant must show the caveator did not have an honest belief based on reasonable grounds that a caveatable interest existed;

(c)  the test is partially subjective and partially objective;

(d)  the subjective component requires an examination of the caveator’s belief and whether it was honestly held;

(e)  it is objective in that it requires that the belief is held on reasonable grounds;

(f)   it is a fallacy is to think that the absence of a caveatable interest at the time when the caveat was lodged establishes that the caveator did not have a reasonable basis for a belief that it was entitled to lodge a caveat; and

(g)  legal advice that the caveator was entitled to lodge the caveat may be of considerable significance in determining whether the claimant has established that the caveat was lodged without reasonable cause, but the content and accuracy of the legal advice must be evaluated with all other relevant circumstances. [80]

3.    Held that “Any person” in s. 118 –

(a)  was capable of covering someone who lodged a caveat without any authority. [82]

(b)  may cover: someone named as executor who had not yet taken out probate where the unregistered interest which could the subject of a caveat was part of the estate and was threatened, or; someone seeking a guardianship order in respect of an incapable person who had such an unregistered interest. [64], [82]

23. Caveat based on constructive trust imposed due to theft.

Aust Café Pty Ltd v Thushara de Soysa & Ors [2019] VCC 237 (15 March 2019) Judge A. Ryan.

The facts were –

  • The second defendant was at all material times the registered proprietor of a property, mortgaged to the ANZ Bank from 2006 to 24 August 2016 and thereafter to Westpac.
  • The plaintiff operated a café where it employed the first defendant as a floor manager and, from August 2009 to February 2014, his then wife the second defendant as a food server.  The third defendant, now married to the first defendant, was also employed there.
  • According to the third defendant’s bank-statements between 29 November 2012 and 30 December 2013 $32,400 was transferred from her to the second defendant by regular payments of $600, said to represent spousal maintenance by the first defendant to the second defendant.
  • There was also evidence that between 22 February 2013 and 8 January 2014 payments of $600 were regularly made into the second defendant’s home loan account.
  • The plaintiff plead or affidavits filed on its behalf deposed that –
    • The first and second defendant had misappropriated moneys by undervaluing customer transactions, and the first defendant retained the extent of the undervaluation and distributed part of it to the second defendant;
    • The second defendant applied some of this money to pay off her mortgage;
    • She had admitted the misappropriation to a private detective retained by the plaintiff.
  • The second defendant plead or deposed –
    • that she had not stolen from the plaintiff but was instructed by its director to record large cash sales as low cash sales, because he did not want a high valuation of the business for Family Law purposes;
    • that the cash registers were cleared every 15 minutes and there was CCTV surveillance;
    • that the alleged admissions were inadmissible;
  • The plaintiff caveated over the property claiming a freehold estate on the grounds of “Implied, Resulting or Constructive Trust”.
  • The second defendant applied under the TLA s. 90(3) for removal of the caveat.

Judge Ryan held:

  1. A person who misappropriates funds held them from the time of receipt on constructive trust for the defrauded party. [20], [21], [24]-[26]
  2. Where those trust funds were used exclusively to acquire property, so long as the trust property could be traced and followed into other property into which it has been converted, that property remained subject to the trust. Further, equitable rights were not lost by the mere fact that the misappropriated funds were mixed with other funds. [20]
  3. The beneficiary may claim a charge over the acquired property to the value of the
    misappropriated funds. [20]
  4. Where the thief gave the funds to a volunteer recipient that recipient came under an equitable obligation once it had notice of the theft. [21]
  5. There were serious questions to be tried about: whether the second defendant colluded with the first defendant to defraud the plaintiff; whether she received stolen moneys via the third defendant; whether any stolen moneys were applied towards her mortgage repayments.  There was accordingly a serious question to be tried that the plaintiff had the interest in the property which it claimed. [28], [18]
  6. The balance of convenience favoured the plaintiff: the second defendant did not point to any current prejudice in dealing with her property beyond general disadvantage. The course which appeared to carry the lowest risk of injustice favoured maintenance of the caveat. [29]
  7. The second defendant was ordered to pay the costs of the application. [32]

Comment: This is a relatively unusual type of case. For completeness a longer list, taken from the author’s Leo Cussen Paper on caveats in July 2017, and including a case cited by her Honour, is –

“Constructive trusts imposed following breach of fiduciary duty or trust. Examples are: Dennis Hanger Pty Ltd v Brown, [2007] VSC 495 – a company maintained a caveat over a former employee’s land, he having used forged company cheques to make mortgage repayments; George v Biztole Corporation Pty Ltd, 26 February 1996, Ashley J – a caveat was maintainable where the alleged misappropriation was applied in making improvements to land already owned by the defaulting fiduciary; Dharmalingham v Registrar of Titles [2005] VSC 417 – a wife maintained a caveat over land given by her husband to his sister, on the grounds of “matrimonial property of caveator and husband fraudulently transferred to husband’s sister”. In Somerville v Nufarm Australia Ltd [2002] VSC 520 a caveat based on an alleged constructive trust over land of the wife of a former employee, who had gambled with his employer’s funds and paid proceeds to her, failed on the ground of no serious question whether the wife had active or constructive knowledge of her husband’s wrongdoing”. 

22. Caveats based on trusts alleged to arise in the domestic context – Muschinski v Dodds trust? Sale of land subject to caveat with requirement of retention of net proceeds to meet caveator’s future claim – Requirement in case of conflict of testimony that caveat be removed unless caveator commenced proceeding to establish interest – Power of courts exercising Family Law jurisdiction to alter property interests rests on legislation not on trusts – Family Law Act does not, of itself, give a party to a ‘marriage’ or a de facto relationship a caveatable interest though court order under that Act could have that effect – Comparison of procedures under TLA s. 90(3) and s. 89A – Indemnity costs against client and reserved against solicitor who lodged caveat.

Karan v Nicholas [2019] VSC 35 (7 February 2019) Daly AsJ.

McRae v Mackrae-Bathory [2019] VSC 298 (7 May 2019) Derham AsJ.  

Hermiz v Yousif [2019] VSC 160 (15 March 2019) Derham AsJ.

 

Karan is a case of a son with a caveatable interest in his parents’ property based on a Muschinski v Dodds constructive trust.

McRae is a dispute between real or alleged domestic partners concerning two properties, involving a Muschinski v Dodds constructive trust, with analysis by Derham AsJ of: (1) the balance of convenience where despite a caveatable interest it is necessary that a property be sold, and; in the case of a property not being sold, the law that, where a caveator has established a prima facie case but there is a conflict of testimony, the caveat would not be removed outright but may be ordered to be removed unless within a certain time a proceeding is issued to establish the caveator’s title.

Hermiz is a groundless claim for a Muschinski v Dodds constructive trust by the mother of a registered proprietor’s child, which also: ventilated why the TLA s. 90(3) procedure should be taken rather than that under s. 89A, and; attracted an order for indemnity costs against the caveator and reserved the caveating solicitor’s liability also to pay them.  This case reiterates that the power of courts exercising Family Law jurisdiction to alter property interests rests on legislation not on the principles of constructive trusts; and that the Family Law Act does not, of itself, give a party to a ‘marriage’ or a de facto relationship a caveatable interest, although an order under that Act could have that effect.

Karan v Nicholas [2019] VSC 35 (7 February 2019) Daly AsJ.

The facts were –

  • Mrs Karan was the registered proprietor of a residential property. Her son Theo was registered proprietor of a neighbouring property where his parents and then his mother lived for many years.
  • She died, as administrator of her estate her other son Frank desired to sell the property, but Theo had caveated claiming an equitable estate in fee simple on the ground of an implied or constructive trust.
  • Frank applied under the Transfer of Land Act (TLA) s. 90(3) to remove the caveat. Theo was agreeable provided part of the sale proceeds was held in trust pending determination of his claim.
  • Theo alleged in substance:
    • residence in the property since 1988;
    • that Frank had used both properties to raise funds for business ventures on the basis of being responsible for the mortgage repayments which he subsequently ceased making leaving Theo to make some repayments;
    • payment of rates and outgoings including insurance;
    • expenditure on repairs, renovations and extensions;
    • in summary, total contributions of over $200,000.

Daly AsJ:

  1. Referred to a “Baumgartner constructive trust” (based on the High Court case of Baumgartner v Baumgartner (1987) 164 CLR 137, also known as a Muschinski v Dodds constructive trust, based on the High Court case of that name: (1984) 160 CLR 583)). The elements of this trust are that a constructive trust for the holding of a beneficial interest in land in particular shares may arise regardless of agreement or intention where:

(a)   A relationship or joint endeavour has broken down without any blame attributable to any party to it;

(b)   There has been a financial contribution by one or both parties to the relationship or to the joint endeavour;

(c)   In these circumstances, and in all the circumstances, it would be unconscionable for one party to the relationship or joint endeavour to retain a benefit greater than that party’s contribution. [7]

  1. Held that Theo had established a serious question to be tried that such a trust existed from before 2012, on the basis of arguments that:

(a)   he and their parents were involved in a joint endeavour whereby he made contributions to the property, which enabled him and his family to live rent free at the property, and enabled his parents to live rent free at his property;

(b)   they all pooled their resources to facilitate the joint endeavour;

(c)   the joint endeavour ended without blame upon the death of the parents; and

(d)   it would be unconscionable for the estate to retain the benefit of his contributions. [8], [14], [16]

  1. Ordered removal of the caveat on condition that all or part of the net sale proceeds be retained to meet any claim by Theo, who was also required to commence a proceeding to pursue his claim within a specified time. [3(k)], [18]-[20]

McRae v Mackrae-Bathory [2019] VSC 298 (7 May 2019) Derham AsJ.  

The chronology was –

  • The plaintiff (Zachary) was the registered proprietor of a property at Albion acquired in 2004 and of a property at Lara acquired in 2013, each encumbered by the same mortgage.
  • In January 2019 the defendant (Rachel) caveated over each piece of land claiming an interest in the land “as chargee” under an implied, resulting or constructive trust.
  • In March 2019 Zachary entered into a contract to sell the Albion property to be settled in May 2019.
  • He applied for removal of the caveats under the TLA s. 90(3).
  • He alleged that:
    • in 2012 she gave birth to their twins, but he had never lived with her as a couple in a de facto relationship and there was no agreement between them sufficient to give rise to a constructive trust;
    • until recently the children lived with her during the week and with him every weekend;
    • in January 2019 she had attempted to kill him leading to an intervention order.
  • Rachel alleged that:
    • they had resided in a ‘full emotional and sexual’ committed de facto relationship between 2002 and 2019 and were publicly known as such;
    • they pooled their income for joint expenses;
    • the properties were acquired during the course of the relationship;
    • she made financial contributions to their purchase and development;
    • Zachary always ‘indicated’ to her that she had an interest in both properties and was entitled to a half share of them;
    • his evidence as to residence with the children was incorrect and that she had not assaulted him.

Derham AsJ held:

  1. The estate or interest claimed as chargee was likely to be the result of a legal error. [3]
  2. If Rachel’s testimony was accepted there was a sensible basis for, and a sufficient probability of, finding that there was a Muschinski v Dodds constructive trust over both properties to the extent of her having an equitable estate in fee simple as a co-tenant with Zachary. This basis was: her direct contributions to the acquisition of the Albion property; her contributions to the maintenance and mortgage payments of both properties. [17]-[19]
  3. Accordingly, while it was neither necessary or appropriate to determine disputed questions of fact, Rachel had a sufficient likelihood of success justifying the practical effect of maintaining the caveat over the Albion property or of requiring deployment of most of the net sale proceeds in reducing the mortgage. [13], [20]
  4. The interaction between the strength of the caveator’s case and the balance of convenience was such that the lowest risk of injustice, whatever the outcome of the disputes, lay in removal of the caveat at settlement on the proviso that the net proceeds of the sale were (after payment of certain credit card debts – see below) applied to reduce the mortgage (Zachary also undertaking not to withdraw loan monies under the mortgage). This outcome preserved most of the benefit of Rachel’s caveatable interest.  To withhold this protection would do her irreparable harm if she succeeded in establishing her claimed interests, while to grant it would not greatly injure Zachary if her claims failed. [4], [21], [22], [24]
  5. However, certain of Zachary’s credit card debts were first to be paid out of the sale proceeds because most were incurred during the relationship alleged by Rachel and some had been incurred in completing the Lara property and so would ultimately benefit Rachel if her constructive trust claim succeeded. [4], [23]
  6. As regards the Lara property, it was clearly established law that where a caveator established a prima facie case but there was a conflict of testimony the court would not order outright removal of the caveat but may order removal unless steps were taken to establish the caveator’s title within a certain time. Accordingly the caveat would be ordered to be removed unless the caveator commenced proceedings to establish her title within a month. [5], [25], [26]
  7. Having regard to offers made by each side before the hearing, which were each to some extent appropriate, the defendant was ordered to pay the plaintiff’s costs fixed at $1,400, being disbursements incurred in issuing the originating process and paying the search fees incurred in putting forward exhibits to his affidavit in support. [27]

 

Hermiz v Yousif [2019] VSC 160 (15 March 2019) Derham AsJ.

The chronology was –

  • In 1998 the plaintiff (Hermiz) and the first defendant (Yousif) were sexually intimate leading to the birth of a child.  They ceased their relationship at about this time and Hermiz had never met the child.
  • Hermiz paid child support.  Yousif never provided him with any financial support.
  • Hermiz married his wife Dina in 2004.  In 2010 they purchased a residential property, became registered proprietors and subsequently cohabited there.
  • Yousif made no contribution to the property, or to any other asset owned by Hermiz, he made no promise about the property or declaration of trust or like arrangement concerning it, and no court order related to it.
  • In December 2018 Hermiz and Dina entered into a contract to sell the land with settlement due in February 2019.
  • In January 2019 Yousif lodged a caveat claiming an interest in the land pursuant to a court order under the Family Law Act.  There was no order giving such an interest.  The caveat was voluntarily removed.
  • On 1 February 2019 Yousif via a firm of solicitors lodged the caveat the subject of this proceeding claiming a freehold estate on the basis of an implied, resulting or constructive trust.  Hermiz’s solicitors wrote to Yousif’s solicitors expounding the absence of basis for the caveat and forshadowing an application for damages and indemnity costs.
  • Hermiz and Dina could not complete the sale, but gave the purchaser possession under a licence and also remained liable to keep up mortgage repayments.
  • Hermiz applied under the TLA s. 90(3) to remove the caveat.
  • Two days before the Supreme Court hearing Yousif filed an application in the Federal Circuit Court for a property order, in particular for an order that the net proceeds of sale of this property be held in trust pending final orders, supported by an affidavit including allegations referred to in 1 below.

Derham AsJ held:

  1. Yousif had not discharged the burden of establishing a serious question to be tried (in the sense of a prima facie case) of the interest in land claimed in the caveat.  There was insufficient evidence of a Muschinski v Dodds constructive trust: her allegation of cooking, cleaning and supporting Hermiz financially whilst he studied for his Australian medical qualification more than a decade before purchase of the land did not reveal that it is or would be unconscionable for him to deny her an interest in the land. [32]-[37], [40], [41]
  2. On the dissolution of marriage or the breakdown of a de facto or domestic relationship, the scope of the Federal Circuit Court’s power to alter property interests was determined by legislation, in this case the Family Law Act s. 90SM, rather than by the principles of constructive trusts.  The Family Law Act did not, of itself, give a party to a ‘marriage’ or a de facto relationship a caveatable interest, although an order under that Act could have that effect. [38], [39]
  3. The balance of convenience was also against Yousif. [42]
  4. Hermiz was justified in applying under the TLA s. 90(3) as opposed to using the administrative procedure in s. 89A. The very reason for the summary procedure under s. 90(3) was to enable an application that avoided the delay involved under s. 89A. [44], [45]
  5. Indemnity costs would be awarded against Yousif because: the nominated basis of resulting, implied or constructive trust for lodging the caveat was without merit, and; she was using the caveat process as a bargaining chip. [52], [53]
  6. Leave would be reserved to Hermiz to claim costs against the solicitors who lodged the caveat. [54]