Blog 90. Caveat removed – no common intention constructive trust

Marinos v Mellissinos & Ors [2024] VSC 642, O’Meara J.

The facts were –

• In about 1987 the first defendant (Despina) and her husband John (the parents) purchased a residential property in Reservoir.
• In 2008, their daughter the plaintiff (Kalliopi) purchased the property from them for $450,000 financed by a Citigroup mortgage.
• The parents lived at the property John dying in 2012.  Kalliopi and her brother the second defendant George also lived there.  The third to fifth defendants were in effect other family members who had lived there until recently.
• In about 2018 the mortgage was ‘refinanced’ with Pepper Finance (Pepper) for $648,000, which Kalliopi claimed neither to have known of until 2021 nor to have benefited from.  She claimed that George had conspired with others to obtain the refinancing and drawn down $220,000 ostensibly for Despina.
• On learning about the ‘refinancing’ Kalliopi complained to AFCA, which determined that errors had led to wrong refinancing, whereby Pepper was required to reduce her debt to $383,688 and adjust the interest rate.
• On 6 March 2024 Despina caveated claiming an implied, resulting or constructive trust.
• The property was sold on 10 May.  The sale was uncompleted.
• On 25 September Despina’s solicitors asserted among other things: that (as allegedly confirmed by Kalliopi in her submissions to AFCA) George had made all repayments to Citibank (claimed to be on behalf of Despina) and that the property was transferred to Kalliopi to protect it from George who Kalliopi had asserted  “had implicated their parents in his finances and now the house was at risk”; George had made all further mortgage repayments (again on behalf of Despina); Despina had lived there since 1987, had made all property-related expenses, and had paid Citibank about $125,000 to avoid it taking possession for mortgage arrears; that accordingly Kalliopi held the property on trust for Despina.
• On 10 October Kalliopi commenced an application under the Transfer of Land Act s. 90(3) to remove the caveat.
• On about 11 October the defendants left the property.
• On 16 October Pepper Finance notified Kalliopi that $21,483.58 was due by 23 October with subsequent monthly repayments of $2,444.11.  Kalliopi deposed that she could not pay this and so anticipated a mortgagee’s sale.
• Kalliopi deposed that: she and the first to fourth defendants continued to live on the land after settlement of her purchase; this was an informal family arrangement, there being no written agreement or contract; her parents agreed to pay towards the utilities and rates in lieu of rent without discussion of any timeframe; she owed George nothing.   She also disputed that she had not made any mortgage repayments.
• Despina deposed that:
  • her understanding of the ‘agreement’ reached in February 2008 was that: the house would belong to the parents; the family would continue to live there; George would pay the mortgage on behalf of the parents; the parents would meet all other expenses;
  • this agreement was performed until 2021, but she did not know why George stopped paying the mortgage then;
  • sometime after John’s death she paid $65,000 in loan arrears to forestall the bank taking possession;
  • later she paid loan arrears of about $60,000;
  • she could not locate documents evidencing these payments;
  • she was unaware of the circumstances of 2018 refinance but received around $220,000 which she gave to George because he said Kalliopi owed him this sum.

The exhibit to Despina’s affidavit, including cheque stubs and similar documents, did not appear to support payments by George.

O’Meara J. ordered that the caveat be removed, holding –

1. The first defendant had not demonstrated a prima facie case that it was probable that a court would find that any such ‘agreement’ as she alleged was made in 2008 and subsequently implemented, and that she would be found to have the equitable interest asserted, having regard to:
   1. her argument that the plaintiff should have responded better to her claims was invalid because: the plaintiff was disadvantaged by her late service of material; the plaintiff denied that she had an interest in the property; since caveating she had not commenced proceedings and when she did belatedly produce an affidavit the exhibited contemporaneous documentary material allegedly supporting her claims was exceedingly ‘slim’ as well as ambiguous; [31]
   2. while the financial arrangements relating to the property were murky, she bore the onus of showing that, on the evidence, her claims were probable; [31]
   3. the best source of evidence concerning the second defendant’s alleged payments pursuant to the ‘agreement’ was himself, but although the affidavits included significant claims related to him, and he appeared to be in in the first defendant’s ‘camp’, he had without reason filed no material.  This was a significant matter to be taken into account in considering the weight of the evidence relied upon by the first defendant; [32]-[34]
   4. whether or not the consideration referred to in sub-paragraph (c) was taken into account:
      1. the plaintiff broadly disputed: the first defendant’s claims of an ‘agreement’; the alleged payments by the first and second defendants and her late father pursuant to that agreement; the first defendant paying $60,000 and $65,000 in respect of ‘arrears’; [35]
      2. none of the few contemporaneous documents produced by the first defendant appeared clearly to support the proposition that the second defendant made any payment towards the mortgage.  The documents produced relating to payments to Citibank appeared to involve payments by either her late husband or from their joint account; [35]
      3. no documents had been produced in support of the first defendant’s claims that of paying rates, utilities, insurance, maintenance costs, or mortgage arrears; [35]
   5. even if any of the first defendant’s evidence could be described as ‘uncontested’ the court was not bound to accept it; [36]
   6. the form in which the first defendant deposed to an ‘agreement’ would be inadmissible at trial; [37]
   7. the contemporaneous documentary material produced by the first defendant was not necessarily indicative of the so called ‘agreement’.  The plaintiff’s evidence was that the first and second defendant and his partner paid her no rent and the categories of payment which the plaintiff acknowledged were identified, and not denied, as being ‘in lieu of rent’.  Accordingly there was a specific alternative explanation for any payments, making considerably more sense than the proposition propounded by the first defendant, not supporting her having an equitable interest in the property; [38]-[41]
   8. the letter of 25 September omitted any clear assertion of an ‘agreement’ in 2008 founding the first defendant having an equitable interest; [42]
   9. the material given to ACFA was not inconsistent with the plaintiff’s claim. [47]

[48]

O’Meara J. stated the legal principles of common intention constructive trusts. [20]-[21]

2. The balance of convenience also supported the plaintiff because: no defendant now lived at the property; maintenance of the caveat would continue to erode any equity in the property; the first defendant had offered no undertaking as to damages or to file a Statement of Claim and no proposal for payment of the mortgagee. [50]-[51]
3. There would be considerable force in the proposition that any further caveat would be an abuse of process attracting indemnity costs. [55]

Philip H. Barton
Owen Dixon Chambers West
Wednesday, December 4, 2024