Month: April 2023

Blog 72. Caveat lapses under Section 89A(5) but caveator obtains injunction

Luna v V & A Luna Pty Ltd & Anor [2023] VSC 126 (22 March 2023), Derham AsJ.

This case is interesting for disparate reasons.  First it affirms that the time for a caveator to give notice under the Transfer of Land Act s. 89A(3)(b) to the Registrar of Titles that proceedings had commenced is strict.  Secondly it shows that the erstwhile caveator may still be able to obtain an injunction having similar effect to the caveat (albeit at the price of an undertaking as to damages).  Thirdly, evidence of the agreement or understanding underlying an alleged constructive trust being weak, his Honour reflected –

“At present, the agreement or understanding, or even assumption, upon which Pasquale provided this assistance is not fully spelled out in his evidence.  But I remind myself after long experience of Australians of Italian origin, that a patriarchal feature of their family arrangements often results in the father, and perhaps the mother as well, holding the family’s wealth either personally or through companies and trusts, with the intention of sharing that wealth either equally or according to the deserts of the members of the family who have contributed to it.”

The Transfer of Land Act s. 89A provides –

(1) … where a recording of a caveat … has been made … any person interested in the land affected thereby … may make application … to the Registrar for the service of a notice pursuant to subsection (3).
…
(3) Upon receiving any such application … the Registrar shall give notice to the caveator that the caveat will lapse … on a day specified in the notice unless in the meantime either—

…
(b) notice in writing is given to the Registrar that proceedings in a court or VCAT to substantiate the claim of the caveator in relation to the land and the estate or interest therein in respect of which the application is made are on foot.

…
(5) Upon the specified day, unless—

…
(b) notice in writing has been given to the Registrar that proceedings as aforesaid are on foot—

the caveat shall lapse …

The facts were –

  • The first defendant (the company) was the registered proprietor of a 20 acre farm at Wollert.  In 2018 the plaintiff (Pasquale) caveated claiming a freehold estate in it based on an implied, resulting or constructive trust.
  • On about 12 December 2022 Pasquale received a notice under s. 89A(3) dated 8 December stating that the caveat would lapse on the first moment of 17 January 2023 unless before that date he gave notice satisfying the requirements of s. 89A(3).
  • The solicitor for Pasquale deposed that on 16 January she telephoned the Land Registry Services – Secure Electronic Registries Victoria (SERV) and was informed by Tiffany in the specialist registration team that, notwithstanding the clear terms of the notice, the final day to respond to it was 17 January.
  • On 17 January (after the first moment) the solicitor filed a generally indorsed Writ and the notice under s. 89A(3)(b) was given.  The basis of the claim as indorsed (observed by his Honour to “have only a slight conformity with the facts as later revealed”) was largely related to an alleged partnership between Pasquale and his late parents Arturo and Vincenza.  Pasquale’s brother, the second defendant (Antonio), was sued as executor of their estate.
  • On 18 January the solicitor was informed by an employee of SERV that the caveat had lapsed.
  • On 23 January 2023, Pasquale issued a Summons.  The Summons sought, first, a declaration that the notice under s. 89A(3)(b) filed on behalf of Pasquale was valid and substantiated his interest in the land and so remained in force, alternatively that 50% of the net proceeds of any sale be held for his benefit pending the determination of the proceeding.
  • On 24 January a judge granted an interlocutory injunction in substance enjoining the defendants from dealing with the land pending final hearing and made further directions.   After the hearing the solicitor for the defendants informed the plaintiff’s solicitors and the court by email that the land had been sold pursuant to a contract of sale some time ago, but that completion of the sale was 24 months hence.
  • Shortly before the hearing on 17 March (see below) the plaintiff’s solicitors learnt of transactions which they alleged were in breach of the injunction, in particular a mortgage and issue of a new electronic title with different title particulars.  The plaintiff filed a Summons seeking that the defendants be dealt with for contempt of the January Order.
  • At that hearing before Derham AsJ on 17 March counsel informed his Honour that the land had been sold by a contract dated December 2022 for about $15 m.  This apparently required a mortgage to be lodged with a countervailing Bank Guarantee to secure the sale.
  • Pasquale deposed in substance that:
    • he worked with his parents from the time of a partnership in a delicatessen in 1969 to build their wealth for the benefit of the whole family. His contributions over the years enabled his parents to acquire properties that ultimately fed the purchase price of the land.  In 1989 he arranged for a family trust to be established with the company as trustee, being a discretionary trust of which the primary beneficiaries were Arturo and Vincenza.  Thus, his efforts and work over a lengthy period contributed indirectly to the purchase price of the land in 1989 and those contributions were made either (not fully spelled out) with the agreement, or on the understanding, that he would share equally with the other members of the immediate family in the wealth accumulated.
    • he contributed directly both his labour and money in establishing a house on the land, and maintaining it, on the assumption that he would retain an equal share in the ultimate wealth created through his and his family’s efforts.
  • Antonio filed an affidavit substantially disputing Pasquale’s affidavit.  This included that Pasquale had been made bankrupt (in fact in 2003) and discharged in 2006.

Counsel for Pasquale submitted inter alia that: it was reasonable for Pasquale’s solicitors to rely upon the representations of Tiffany in lodging the material required by s. 89A(3) on 17 January 2023; the Registrar should be estopped from lapsing the caveat; the court had an inherent jurisdiction to make orders ‘voiding the lapsing of the caveat’.

Derham AsJ in substance continued the injunction (while altering its wording), holding –

  1. The caveat lapsed at the commencement of 17 January 2023 by reason of the operation of s. 89A(3) and (5). The court had no power to reverse this. [15], [49], [55], [56]
  2. The evidence in support of the plaintiff being the beneficiary of a constructive trust of the land was, at present, rather frail and somewhat sketchy: the prima facie case was not strong. It sufficed, however, that the plaintiff show a sufficient likelihood of success that in the circumstances justified the practical effect of the injunction on the defendants.  His Honour doubted as a matter of principle the defendants’ argument that the plaintiff could not take an interest pursuant to a constructive trust where he was also a beneficiary of the family trust: if it was unconscionable in the circumstances for the trustee of the family trust to deny that he had a proprietary interest in the land, why would his being a beneficiary of that trust, particularly one with no vested interest in its assets, be a barrier?   This argument required further elucidation. [26], [75], [77]
  3. With respect to the plaintiff’s bankruptcy and the possibility that his interest in the land had vested in his trustee in bankruptcy, it would be in the parties’ power to inform the trustee and give him an opportunity of being joined as a party. It was not, in his Honour’s preliminary view, satisfactory for the defendants to use this vesting as a defence without joining the trustee as a party. [76]
  4. On the balance of convenience, in the current circumstances where the plaintiff’s proof of his rights was not strong, an interlocutory injunction may be granted because to withhold it would do him irreparable harm while (the contract of sale having a 24 month settlement date) to grant it would not greatly injure the defendants. Maintenance of the status quo would not harm the defendants but to deny the injunction could injure the plaintiff by denying him protection against dissipation of the value of the land. [78]
  5. The further continuation of the interlocutory injunction would be subject to the plaintiff complying with the requirement to file further evidence in support of his claim. [79]

Philip H. Barton
Owen Dixon Chambers West
Thursday, April 20, 2023

Blog 71. Caveat based on alleged Baumgartner constructive trust fails.

Sandich v Fasoulis & Anor [2023] VSC 65 (17 February 2023), John Dixon J.

  • The plaintiff, Ms Sandich, and her former husband were registered proprietors of a property in Kew.  The first defendant, Mr Fasoulis, married Ms Sandich in 2017 but they later separated.
  • Mr Fasoulis deposed that –
    • At the start of their marriage Ms Sandich solely occupied the Kew property and he shared his time between it and his property in Murrumbeena with his children.
    • The financial burden of supporting her and his children and running two households, quickly became untenable and he fell into serious financial difficulty.   He sold property including the Murrumbeena property and used the proceeds to pay debts including debts of Ms Sandich.
    • He and his children then moved to the Kew property until its sale by Family Court order, the contract of sale being dated 27 July 2022 and due for settlement on 20 February 2023.  He financially assisted in preparing the property for sale, undertaking substantial refurbishments costing an estimated $20,000, Ms Sandich having no money.
    • On 6 February 2023 Mr Fasoulis commenced family law proceedings against Ms Sandich seeking financial orders pursuant to s. 79(1) of of the Family Law Act.  The next day he through a solicitor lodged a caveat claiming an ‘Implied, resulting or constructive trust,’ the estate or interest claimed being a ‘freehold estate‘ and the prohibition on dealings being ‘absolutely.’
  • Ms Sandich applied under the Transfer of Land Act s. s. 90(3) for removal of the caveat.
  • Mr Fasoulis argued that there was a serious question to be tried that he was a beneficiary of a constructive trust based on Baumgartner v Baumgartner (1987) 164 CLR 137.  He deposed that: he discussed with Ms Sandich the benefit of undertaking substantial refurbishment of the Kew property so as to realise its maximum value; they discussed that getting the highest sale price would benefit both of them financially; and for this reason his funds were invested in the Kew property.  He did not depose that she said, or agreed, that such expenditure would entitle him to an interest in the property.

John Dixon J. ordered removal of the caveat with costs –

  1. The first defendant had not established a serious question to be tried of a caveatable interest because –
    1. The grounds of claim could not be made out against the joint-registered proprietor Ms Sandich’s former husband. There was no evidence that he was party to a joint endeavour or relationship. [21], [30]
    2. The claim was overstated in the form of a trust affecting the whole freehold estate. [30]
    3. There was no joint relationship or endeavour for improvement of the Kew property.  The first defendant had only contributed some $20,000 to tidying up the property for sale, which did not improve the property nor was a significant amount, in return for a promise that he be repaid out of the sale proceeds.  There was no evidence of any specific discussion or agreement that he would have any interest in the property.  He had conflated what he alleged to be contributions to the marriage with what he described as an agreement that he finance the cost of preparing the property for sale on the basis that he would be repaid out of the proceeds of sale. [20], [22], [24]-[26], [28], [30]
    4. If there was any pooling of resources to the parties’ common benefit it was in the circumstances of the marriage and not in relation to the improvement of the Kew property. [28]
    5. There was no unconscionability in not recognising that the first defendant had an equitable interest in the property, particularly where he contended that his expenditure was on the basis of a promise that he be repaid. [26]
  2. Claims under the Family Law Act s. 79 did not create caveatable interests in any land that may be part of the matrimonial assets. [27]
  3. Although the caveat was lodged as a bargaining chip in the Family Law proceedings the circumstances were not such as to warrant an order for indemnity costs against the caveator. [34], [37], [39], [42]

Philip H. Barton
Owen Dixon Chambers West
Tuesday, April 4, 2023