Category: Constructive trust based on proprietary estoppel

Blog 92. No proprietary estoppel.

This Blog deals primarily with Saad v Saad & Anor [2025] VSC 15 in which Gobbo AsJ removed a caveat claimed to be justifiable on the basis of proprietary estoppel.  However, in passing I mention Milenkovic v Milenkovic [2024] VSC 763 in which alleged (and disputed) delay in lodging a caveat and other matters were held not to give rise to the defence of laches against a claim for proprietary estoppel.

 Saad v Saad & Anor [2025] VSC 15, Gobbo AsJ.  (31 January 2025)

The facts were as follows.

  • The plaintiff (Khadigi) and her husband Abboud (the couple) had 13 children including the first defendant (Waleed) who was married to the second defendant (Hala).
  • In 1975 the couple became registered proprietors of 179 Union Street Brunswick West (the Land).
  • In 1983 Waleed purchased a property elsewhere.  In about 1986 Abboud encouraged him to purchase 181 Union Street (No. 181), which adjoined the Land.  In 1986 the defendants became registered proprietors and residents of No. 181, which had its own driveway and was divided from the Land by a fence.
  • Waleed deposed that from 1982 he was the primary income earner in the family, paying his entire wages to Abboud who used them for all family expenses, including property related expenses of the Land.
  • The couple determined to develop the Land with a double story dwelling and a granny unit.  In about 1987 Abboud requested Waleed to provide 57.7 sq. m. (the parcel) from No. 181 to enable this development.
  • The defendants each deposed to the existence of an agreement made in 1987 (the alleged 1987 Agreement), which Khadigi denied.   Waleed deposed –
    • In late 1987 Abboud explained his development intentions and showed him architectural plans.  Abboud said in effect –
    • for the development he needed approximately a further 1.22 metres running along the entire boundary, which he asked Waleed to provide by changing the common boundary;
    • this development would provide a ‘family complex’ for the benefit of the entire family;
    • there would be no dividing fence but rather a shared driveway and communal gathering space for the family;
    • both new dwellings would be utilised for the benefit of the entire family.
    • Because the couple’s only income was Centrelink benefits, Abboud asked him to continue making financial contributions to the family for the costs of this development.
    • Abboud further said in effect that –
      • if Waleed provided the parcel and contributed to the development’s financial costs by continuing providing his earnings to Abboud, he would receive a proprietary interest in the Land commensurate to this parcel and his financial contributions;
      • “if either of us determined to sell our respective properties in the future, we would offer the property to the other party for purchase at first instance”.
    • He agreed to Abboud’s proposal.  This agreement was not documented, he trusted his father, and the family was very close during Abboud’s life.
    • Abboud told Khadigi of this Agreement and it was openly discussed within the family.
    • Waleed paid his business earnings, being financial contribution toward the costs of the development, to Abboud in Khadigi’s presence.  Relying on the alleged 1987 Agreement, he paid his parents 60% – 70% of his earnings from July 1987 to 1996. And (he subsequently deposed) he “continued to provide Abboud with [his] entire wages and earnings”.   He contributed $120,000.
    • After the development was completed Khadigi said in effect that “if it wasn’t for you helping us with providing the land and money, then we wouldn’t be where we are”.
    • He disputed her evidence that in 1988 he agreed to make a gift of the parcel.   Before April 2023 she had not told him that she did not agree with this Agreement or refer to the parcel as a “gift”.
  • Hala deposed –
    • Abboud handed her a document which he asked her to sign but which she could not read or understand.  He told her that it was to transfer a small part of the land between the two properties for the development.
    • Abboud said that he intended to build these properties for the benefit of the family, and that her and Waleed’s contributions would not be lost because they would have an ownership in the Land and, if it was ever to be sold it would be to them for a price taking into account their contributions.
  • Waleed’s brother Khaldoun deposed that: he discussed with Abboud the need for Waleed to transfer some land for the development; Abboud told him that Waleed would be contributing to construction costs; between 1989 and 1996 he frequently witnessed Waleed giving cash to Abboud for the construction costs and for repayment of an ANZ loan;  it was common knowledge that in accordance with Lebanese custom Waleed as the oldest son would have the first right to purchase the Land.
  • Khadigi substantially denied the contents of the above affidavits, denied that the defendants were promised an interest in the Land, and deposed that the parcel was a gift.  She also relied on affidavits of her sons Saad, Bessim and Zafir.  Their evidence included that they were told that the Land was to go to Saad and had never heard of the alleged 1987 Agreement, which Agreement would have been contrary to Lebanese culture.
  • Khadigi and Zafir deposed that the construction of the development was funded from the proceeds of sale of another property, plus (as deposed to by Khadigi) loans from family and friends.
  • A plan of consolidation was prepared.  In January 1988 a Transfer of the parcel recorded the consideration as $500 (which Waleed deposed was determined by Abboud but not paid, Khadigi also deposing to non-payment), with stamp duty of $70 on an assessed value of $5,000.  The duty was paid and the Transfer was registered in January 1988.
  • In 1989 the couple borrowed $62,000 from the ANZ bank secured by a mortgage over both pieces of land.  Simultaneously they entered another ANZ mortgage (the collateral mortgage) using the same security for a loan of $33,200.  The collateral mortgage named Waleed and Zafir as the customers.  Whether the named parties in fact entered into the mortgages, the reason for the mortgages and the underlying debts which they secured were disputed.
  • The plan of consolidation and mortgages were registered in 1991.
  • Abboud died in 2016.
  • In August 2023 Khadigi entered a contract to sell the Land and Saad caveated over it claiming as purchaser.
  • On 25 September 2023 the defendants caveated over the Land claiming an implied, resulting or constructive trust.
  • In September 2023 the defendants’ then solicitors wrote inter alia: asserting that Khadigi “holds on trust for our client (sic) the portion of land at 179 Union Street, Brunswick West VIC 3055 … consolidated on or about 31 January 1991”; advising that “our client’s [sic] portion has now been secured by caveat lodged by our office”; and stating that an in principle agreement had been reached in relation to their clients’ interest, which was set out including that “Our client is [sic] to obtain a valuation in relation to their portion of your client’s property” upon receipt of which Khadigi would pay “our client” the said value in return for withdrawal of the caveat; and stating that that firm was drafting an Agreement outlining the above for signing.  The letter did not refer to an option to purchase.
  • In October 2023 those solicitors forwarded a draft deed (Deed) to Khadigi’s solicitors which included that the caveat would be withdrawn in exchange for payment of $750,000.
  • Waleed’s affidavit did not explain why the solicitor’s letter was sent.  He deposed that he did not see the Deed before it was sent.  Hala’s affidavit did not refer to the letter or Deed.
  • Khaldoun caveated over the Land in January 2024 alleging an implied, resulting or constructive trust.  He withdrew this caveat in April 2024.
  • Khadigi applied under the Transfer of Land Act s. 90(3) for removal of the defendants’ caveat.  Subsequently the defendants issued, but had not yet served, an Originating Motion against her claiming relief related to the alleged 1987 Agreement, which allegedly founded a proprietary estoppel or constructive trust either based on unconscionability or common intention.  Evidence was given that the parcel was now worth $50,000.

 Gobbo AsJ ordered removal of the caveat, holding –

  1. Khaldoun’s affidavit was unpersuasive because: he did not explain the circumstances surrounding his caveat or its withdrawal despite the possibility that his claimed interest was inconsistent with the rights asserted by the defendants; it contradicted Waleed’s evidence, particularly on the option. [63]
  2. No party’s version of events was consistent with the mortgage documents. [88]
  3. The defendants had not established a prima facie case of Waleed’s alleged financial contributions to the development.  The court could not safely conclude that Waleed had made any financial contributions to the Land pursuant to the alleged 1987 Agreement or otherwise. [89], [105]
  4. The solicitor’s letter was inconsistent with the rights now asserted by the defendants. [97], [106], [112]
  5. The position taken in the Deed was inconsistent with the case now advanced by the defendants. [107], [112]
  6. Waleed’s assertion that after the Land was sold an agreement was reached with Khadigi concerning any claim over the Land was untenable.   The assertion that the alleged 1987 Agreement included an option to purchase was inconsistent with the solicitor’s letter, the Deed, and with Waleed’s demand to Khadigi not to carry out the sale to Saad.  The demand for payment of $750,000 was also inconsistent with the terms of the alleged 1987 Agreement, in particular as to any option to purchase.  Permitting the sale to Saad to proceed (in return for payment of $750,000) was also inconsistent with the argument that removal of the caveat would be unjust because depriving the defendants of their intended family complex on the Land and No. 181. [108], [109]
  7. A contract was not binding and enforceable if one of its essential terms had not been agreed.   Although the court was required in construing a commercial contract to approach its task in a commonsense way to attempt to give effect to the bargain, it may encounter ambiguity so obscure as to indicate no agreement, leading to a particular contractual provision be held void for uncertainty.  This was so with the alleged option to purchase.  The court could not be satisfied of a prima facie case of the alleged 1987 Agreement including the option to purchase – the existence of which was critical to maintenance of the caveat. [115]-[117], [122]
  8. The defendants had not established a prima facie case of an implied, resulting or constructive trust over the whole of the Land in the terms of the alleged 1987 Agreement.  Their evidence of it was ambiguous and too general to establish a prima facie case save of the transfer of the parcel.  In particular: its existence was disputed; assuming it existed it was disputed whether the couple or just Waleed had a proprietary interest, and whether in all the Land or limited to the value of the parcel or to the value of Waleed’s financial contributions, and whether the agreement included an option to purchase. [127], [128]
  9. If a caveator established a prima facie case but there was a conflict of testimony the court may order removal of the caveat unless the caveator took steps to establish the caveator’s title within a certain time.  However, as stated in holding 8, as to the whole of the Land there was no prima facie case  [128]
  10. The caveators had only established a prima facie case of the transfer of the parcel, although not necessarily pursuant to the alleged 1987 Agreement.  At its highest their interest in the Land was limited to value of the parcel, being $50,000.  It was inappropriate to maintain the caveat when that interest could be protected by payment of $50,000 into trust pending determination of the terms on which the parcel was transferred. [125]
  11. The balance of convenience also favoured removal of the caveat because: of the contract of sale to Saad; Khadigi was elderly and needed the sale proceeds to purchase a residence; she had agreed to pay $50,000 into a solicitor’s trust account or into court; the defendants would have continued access to No. 181 notwithstanding the sale; the foregoing outweighed the defendants’ desire to purchase the Land to develop their own family compound. [137], [138]

Gobbo AsJ stated the legal principles of: common intention constructive trusts ([51], [52]); proprietary estoppel ([53]-[57], [121); and contractual interpretation ([115]-[120]).

Philip H. Barton

Owen Dixon Chambers West

Wednesday, February 26, 2025

Blog 85. The Giurina litigation.

The cases in this Blog partially concern caveats and illustrate a persistent use of the legal system leading to loss of a property.  They are in chronological order: Giurina v Greater Geelong City Council & Anor [2023] VSCA 148; Giurina v Greater Geelong City Council & Anor [2023] VSCA 299; Giurina v Registrar of Titles [2023] VSC 784; Giurina v Sheriff (Vic) [2024] VSCA 112.  (There are many earlier Giurina cases but this Blog commences with the Court of Appeal caveat case).   The caveat points arising in these cases are:

Giurina v Greater Geelong City Council & Anor [2023] VSCA 148 – unlike the Transfer of Land Act s. 89A(1), which enables “any person interested in the land” to apply to the Registrar of Titles for service of a notice, an applicant for relief under s. 90(3) is not require to have an interest in the land.

Giurina v Greater Geelong City Council & Anor [2023] VSCA 299 – confirming the statement of law in the previous Court of Appeal case and also rejecting the proposition that where there is a warrant of seizure and sale (while saying nothing about the standing of the Sheriff to apply to remove a caveat from the title of a property subject to the warrant) only the Sheriff had standing to apply to remove the caveats by virtue of the warrants.

Giurina v Registrar of Titles [2023] VSC 784 – a proposed caveat by an executor, in his personal capacity, claiming that he held the land on trust for himself is untenable.

Giurina v Sheriff (Vic) [2024] VSCA 112 – where a court has made an order requiring leave for lodging further caveats, the court has a broad general discretion, to be exercised by reference to whatever considerations are relevant in the particular case, in determining whether to grant leave.

By way of background –

  • Carolina Nacinovich died in 2002.  At the time of her death she was the registered proprietor of a property in Geelong West.  She was still so registered.
  • Ermanno Giurina obtained probate of the will of the deceased.  By operation of s. 13 of the Administration and Probate Act the property vested in Giurina as executor at that time.  The deceased bequeathed the property to him ‘for his own use and benefit absolutely’.   Clause 5 of the will provided:

I give devise and bequeath the rest of my estate to my trustee upon trust to sell call in and convert into money … and after the payment of my just debts funeral and testamentary expenses and death estate and succession duties State Federal or otherwise to hold the residue upon trust for the following in equal shares …

and thereafter were named two other people.

  • In October 2003 Giurina made a handwritten note which he signed twice (once as executor and once as beneficiary), reading –

‘Note 11-10-2003

I assent as Executor to dispose of property at Geelong West … to myself as beneficiary as per [3] of Will of C. Nacinovich —  no liabilities that I am aware of – no power of sale anyway —  dispose of specific devise of Property only — chase up other matters re funds —  Ermanno Giurina —  Executor.

I accept assent — agree as beneficiary to pay for outgoings, costs, etc myself privately for Property — not claim anything against Nacinovich Estate — Ermanno Giurina

Beneficiary’

  • In 2019 Greater Geelong City Council made an emergency order under s. 102 of the Building Act 1993 concerning the house on the property.  Giurina, as executor, engaged in unsuccessful litigation against the Council concerning the order, resulting in orders for costs being made against him in his executorial capacity.
  • In March 2022, at the request of the Council, warrants of seizure and sale were issued against the property.  The warrants inter alia authorised execution to be levied by the Sheriff for the purpose of satisfying the costs orders.  In his capacity as executor Giurina unsuccessfully sought to set aside the warrants.
  • In July 2022 Giurina lodged a caveat, naming himself as caveator.  The estate or interest claimed was ‘freehold estate’, the grounds of claim were ‘estoppel’ and the prohibition was listed as ‘absolutely’.
  • In August 2022 Giurina lodged a second caveat, naming himself as caveator.  The estate or interest claimed was ‘freehold estate’, the prohibition was listed as ‘absolutely’, and the grounds of claim were stated as: “Beneficiary/ies under the will of … [Nacinovich] … where probate has been granted and all debts in the estate have been paid”.
  • The Council applied under the Transfer of Land Act s. 90(3) for removal of the caveats.  Section s. 90(3) materially provided that “any person who was adversely affected” by a caveat could bring proceedings for its removal.   Giurina argued that the Council did not have standing to make the application because, as a mere unsecured judgment creditor, it did not have an interest in the land.  Matthews AsJ rejected this argument and on 9 March 2023 directed the removal of the caveats and restrained Giurina from lodging any further caveat without leave ([2023] VSC 59).   Matthews AsJ also refused an application to stay these orders.
  • On 31 March 2023 Giurina filed an application for leave to appeal to the Court of Appeal on the single proposed ground of appeal that Matthews AsJ erred in law in concluding that the Council had standing to bring the caveat removal application pursuant to s. 90(3).
  • On 14 April 2023, Giurina applied to the Court of Appeal to stay the orders of Matthews AsJ.  In Giurina v Greater Geelong City Council & Another [2023] VSCA 148 Osborn and Kaye JJA refused to grant the stay sought on the ground that the proposed ground of appeal was not reasonably arguable, noting that, unlike the administrative procedure in s. 89A(1) which enabled “any person interested in the land” to apply to the Registrar of Titles for service of a notice requiring the caveator in substance to give notice of proceedings to substantiate the caveator’s claim, an applicant for relief under s. 90(3) was not require to have an interest in the land ([15(b)]).   The construction of s. 90(3) contended for by the applicant would result in an absurd outcome, namely that a judgment creditor could never obtain a removal of caveat under s. 90(3) in aid of the sale of real property pursuant to a warrant of seizure and sale ([15(e)]).

On 17 August 2023, Giurina filed an application in the Court of Appeal to amend his proposed grounds of appeal. By that application, he sought to add the following proposed grounds of appeal:

    1. Her Honour erred at law and on the evidence before her by concluding that [Mr Giurina] did not have a prima facie case [in relation] to the interest claimed in the first caveat and even if she was wrong about that the prima facie case was very weak and consequently the balance of convenience favoured [the Council].
    2. Her Honour erred at law and on the evidence before her by concluding that [Mr Giurina] did not have a prima facie case [in relation] to the interest claimed in the second caveat and even if she was wrong about that the prima facie case was very weak and consequently, the balance of convenience favoured [the Council].
    3. Her Honour erred at law in concluding that both caveats should be removed instead of maintaining them until the trial where any dispute of the factual issues or the claims which the caveats seek to protect can be determined.

In Giurina v Greater Geelong City Council & Anor [2023] VSCA 299 Beach and McLeish JJA heard the applications for leave to amend the grounds of appeal and for leave to appeal and (if leave was granted) the appeal.   Their Honours refused leave to amend the grounds and refused leave to appeal, holding –

  1. For the reasons given in Giurina v Greater Geelong City Council & Another [2023] VSCA 148, which their Honours adopted as their own, proposed ground 1 was not reasonably arguable. Their Honours further rejected the new submission that (while saying nothing about the standing of the Sheriff to apply to remove a caveat from the title of a property subject to a warrant of seizure and sale) only the Sheriff had standing to apply to remove the caveats by virtue of the warrants. [24]-[25]
  2. Proposed ground 2 was based on an alleged representation Giurina made to himself in 2003 and his conduct following the death of Ms Nacinovich, whereby he alleged that the property belonged to him personally by reason of a proprietary estoppel.  It was totally devoid of merit.  The balance of convenience was also against maintenance of the first caveat. [37], [38], [57]
  3. Proposed ground 3 was without merit. Although the bequest to Giurina was a specific bequest of the property to him for his use and benefit absolutely, the use of the word ‘absolutely’ did not mean that the property vested in him at the time of death of the deceased. Giurina had not made out a prima facie case that the property was no longer an asset in the estate. [47]-[49], [57]
  4. Proposed ground 4 was without merit. Giurina had taken no steps to commence the proceeding or articulate a claim for the trial he sought. If, as alleged owner of the property, he applied in his personal capacity to have the warrants set aside, it would be difficult to see how that could not be an abuse of process of the kind referred to in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. [51], [55], [57]
  5. Another reason for refusing leave to amend was because Giurina had stated that the reason for the application for leave to amend was because, after a previous hearing, it had become obvious to him that ‘to have any chance of succeeding’, he ‘had to add additional grounds’. [58]

Giurina v Registrar of Titles [2023] VSC 784, Barrett AsJ.  This was an application by Giurina for leave to lodge a caveat over the property (Matthews AsJ having restrained lodgment of further caveats without leave).  Giurina argued that –

  • he (as executor) was trustee for himself (as beneficiary) pursuant to a constructive, resulting or implied trust arising as a result of his personal expenditure (as opposed to his expenditure as trustee) in relation to the property.  He had deposed that since 11 October 2003, he believed that he had not performed any executorial acts and he had since been, personally and not on behalf of the estate, making payments for the property’s outgoings in his capacity as a specific beneficiary.  These outgoings covered: rates, valuation and charges; insurance; gardening; fencing; and maintenance.   The total was approximately $120,000 excluding maintenance.
  • the property was given to him absolutely by the terms of the will and was unavailable to satisfy any debts arising out of his administration of the estate.
  • as executor he had on 11 October 2003 assented to the transfer of the property to himself, and so the estate had been fully administered.

Barrett AsJ refused the application, holding –

  1. It was a fundamental principle of common law and equity that a person who held the entire legal and beneficial interest in a property cannot hold the property on trust for themselves.  If one person had both the legal estate and the entire beneficial interest in the land he held an entire and unqualified legal interest and not two separate interests, one legal and the other equitable.  If that person first held the legal estate upon trust for some other person and thereafter that other person transferred to the first person the entire equitable interest, then again the first person did not hold two separate interests but a single entire interest – he was the absolute owner of an estate in fee simple in the land.  The equitable interest merged into the legal estate to comprise a single absolute interest in the land.  However, although the trustee could not be the sole beneficiary, the trustee could be one of the beneficiaries. [23]-[24]
  2. Further, it was impossible for a constructive trust to be imposed to avoid any unconscientious or unconscionable conduct between Giurina and himself. [25]
  3. The argument that Giurina assented (pursuant to s. 41(1) of the Administration and Probate Act) to the transfer to himself of the beneficial interest in the property was also invalid: the only interest in real property that may be conveyed by assent was the interest held by the testator.  The process of assent did not enable a personal representative to separate the legal estate and equitable interest in real property. [27]
  4. It was accordingly not arguable that Giurina had the caveatable interest asserted. [28]
  5. Further, Giurina was personally liable for debts incurred by himself as executor.  Although he had a right to an indemnity out of the assets of the estate, an executor’s liability was not necessarily limited to the assets of the estate, eg the indemnity did not extend to costs of actions improperly commenced or defended.  Accordingly, his submissions as to the different capacities in which he held the property were both of limited weight and irrelevant to the question of leave. [32]-[33]
  6. Finally, even if the question of the availability of the property to satisfy costs orders was relevant to the question of leave it was not open to the court to upset the orders of Matthews AsJ that the Property was affected by the costs orders and the warrant.  [34]

Giurina v Sheriff (Vic) [2024] VSCA 112 (Walker and Orr JJA).   This was the hearing of two applications.  In the first application the respondent was the Sheriff.  In the second application the respondent was the Registrar of Titles.  The first application arose from an application by Giurina for an interlocutory injunction to prevent the Sheriff’s sale.  The second application arose from an application by Giurina for leave to lodge two caveats on the property.  The applications were heard at first instance in the Practice Court on 23 February 2024.  On 26 February, the day before the sale was due to occur, Forbes J. refused each application on a number of grounds.  Her Honour held that the test for granting leave an application for leave to lodge a caveat was like an application to remove a caveat under s. 90(3), and accordingly the test in relation to the caveatable interest was analogous to the interlocutory injunction test.  Her Honour further noted: there was no evidence of a declaration of trust by Giurina in favour of himself – this argument appeared to stem only from the words of the will, which empowered Giurina to act as trustee as well as executor, but which did not, of itself, create a trust relationship in respect of any particular property of the estate; even if a trust in favour of oneself could be made there was not a serious question to be tried that the applicant had a caveatable interest.   Giurina sought leave to appeal from her Honour’s decision.  In the caveat proceeding he also sought an extension of time in which to file his notice of application for leave to appeal.

The Court of Appeal refused leave to appeal in the injunction proceeding and refused the application for an extension of time in the caveat proceeding, holding –

  1. The underlying basis for Giurina’s claims — that the estate has been fully administered, at least in relation to the property — was without merit.  In particular: the estate was the legal owner of the property, the property having vested in Giurina as executor upon the grant of probate but formal transfer of the registered title to the property to him not having occurred; the estate could not be regarded as having been fully administered until its assets had been distributed in accordance with the will; this was also why Giurina’s contention that he was a trustee of the property, holding it on trust for himself as beneficiary, lacked any prospect of success. [49], [50], [52], [84]
  2. The balance of convenience also weighed against the grant of an interlocutory injunction. [66]
  3. In determining whether to grant leave to lodge a further caveat the court had a broad general discretion to be exercised by reference to whatever considerations were relevant in the particular case.  In exercising that discretion it was permissible to adopt the approach taken by Forbes J., namely to assess whether the applicant for leave could demonstrate an arguable caveatable interest which, on the balance of convenience, should remain pending trial.  Even if the court was to conclude that Forbes J. made a specific error in the course of her reasoning it would make the same order, because the basis for Giurina’s asserted interest that he sought to protect by the caveats was the interest he invalidly claimed had resulted from the alleged completion of the administration of the estate. [83], [84], [86], [93], [94]
  4. Accordingly it would be futile to extend the time for filing of the notice of application for leave to appeal in the caveat proceeding. [96]

Philip H. Barton

Owen Dixon Chambers West

Tuesday, October 29, 2024

Blog 80. Caveat over retirement village community centre upheld.

El-Shahawy v Owners Corporation 1 Plan No. PS606836R [2023] VSC 597, Daly AsJ.

This is the first case covered by the Blog concerning a retirement village.  The owners corporation was held to have a caveatable interest based on proprietary estoppel in the community centre which had remained vested in the developer.  This case also confirms that an undertaking as to damages is not usually required by a caveator resisting removal under the Transfer of Land Act s. 90(3).  The facts were –

  • A developer obtained a planning permit to subdivide land and to construct 60 units on individual lots, a community centre with outdoor recreation facilities, and carparking, for the purposes of establishing an Over 55 Residential Community.  The permit was extended to permit completion of works by July 2025.
  • Subdivision occurred and 42 units were completed and sold to incoming residents who became registered proprietors of individual lots. The marketing material used by the developer included: “Community Centre owned and controlled by Residents”.
  • A master plan for a staged subdivision was registered. The developer added to the common property at each stage of the subdivision until stage 13.
  • The community centre, completed in 2016, was managed by the first defendant which also managed the common property.
  • In 2020, while still the registered proprietor of four unsold “super lots” and the lot improved by the community centre (together “the land”), the developer went into liquidation. The liquidators were subsequently appointed as receivers of the land.
  • On 8 November 2021, the solicitors for the liquidators wrote to the former solicitors for the owners corporation stating inter alia that: the liquidators were negotiating with a prospective purchaser who, the writer understood, intended to complete the development; such completion and the transfer of the community centre to the owners corporation was initially designed to be completed by way of registration of a plan of subdivision, but, as the subdivision permit had lapsed, such transfer was impossible without new permits; it was anticipated that any subsequent plans and permits obtained by that purchaser would include the likely outcome of the community centre lot vesting in the owners corporation by registration of a plan of subdivision.
  • On 15 February 2022, the liquidators entered into a contract to sell the land to the first plaintiff which nominated the second plaintiff as purchaser. The section 32 statement stated:

“The community centre is deemed to be an Owners Corporation asset and no determinations have been received (to 31-10-2021).  Legal action is still an option to pusue [sic] ownership change if this assest [sic] is not transferred to common property upon any future settlement of [the subject lot].”

  • Between the date of execution of the contract and 10 March 2022: the manager of the owners corporation told the first plaintiff that the residents considered that they had paid for the community centre as part of their purchase and believed that it should be transferred to common property; at a meeting between the first plaintiff and a group of residents, including committee members of the owners corporation, the first plaintiff said that the second plaintiff would lease the community centre to the owners corporation on particular terms, and he was subsequently told that on a show of hands a majority of those present favoured accepting his proposal; the first plaintiff’s solicitors wrote to the manager stating inter alia that the first plaintiff intended to nominate a corporate entity to take a transfer which would lease the community centre to the owners corporation; there was no reply to the letter and the first plaintiff paid the deposit; on 10 March 2022 the members of the owners corporation voted to reject the first plaintiff’s offer.
  • On 27 July 2022, shortly before settlement of the contract of sale, the owners corporation caveated over the community centre lot prohibiting all dealings and claiming a ‘freehold estate’ on the grounds of an ‘implied, resulting or constructive trust’.
  • The first plaintiff and the liquidators entered into a supplementary deed providing for the transfer of the super lots to the second plaintiff, leaving the developer as registered proprietor of the subject lot.
  • In September 2022 the owners corporation issued a Supreme Court proceeding seeking leave to commence a proceeding against the developer. In October 2022 a VCAT application was issued seeking an order under s. 169J of the Owners Corporation Act 2006 to give the chairperson of the owners corporation committee retrospective leave to commence the Supreme Court leave application on behalf of the owners corporation.  Both applications for leave remained undetermined.  The affidavits filed in both leave applications included a draft Statement of Claim pleading that –
    • between August 2006 and November 2021 the developer represented to the owners corporation and residents that it would construct a community centre on the community centre lot for the benefit of residents and transfer the title of this lot to the owners corporation;
    • the developer constructed the community centre in 2016;
    • the owners corporation and the residents reasonably believed and/or expected that the owners corporation would acquire the fee simple title to this lot, and the developer knew and/or intended that this belief exist and that the owners corporation and the residents would act in reliance upon it;
    • from 8 October 2009, the owners corporation and the residents reasonably acted to their detriment, being the amount paid by purchasers for their lots and the payment by the owners corporation of all the community centre’s costs and expenses, and changed their position in reliance upon the representations and such expectation and belief;
    • if this lot was not transferred to the owners corporation it would thereby suffer loss, the value of residents’ lots would diminish, non transfer would accordingly be unconscionable, and an order for transfer was accordingly sought.
  • The first plaintiff applied under s. 90(3) of the Transfer of Land Act to remove the caveat.
  • The first plaintiff deposed inter alia: to the anticipated cost of completion of works required by the planning permit to the community centre lot; that the owners corporation neither had funds for this nor intended to levy them; that the building works proposed would increase the value of existing lots; that the only relevant representation he knew of when he signed the contract was that contained in the section 32 statement and that before then he had no means of knowledge of the residents’ claims; if the development was not completed in accordance with the planning permit he may not receive occupancy or subdivision permits.
  • The material relied on by the defendant was in substance supportive of the allegations in the draft Statement of Claim. It included: that when the community centre was completed the developer could not “sign it over” because it was mortgaged to a bank but that nonetheless the developer gave the residents exclusive control over it; the owners corporation had for the last six years spent a considerable sum on the community centre in the expectation of obtaining title.

The Subdivision Act provided –

An owners corporation could “purchase or otherwise obtain land” if its members so unanimously resolved (s. 32(b));

Under s. 32D VCAT could grant a wide range of applications relating to plans of subdivision on the application of a member of or an owners corporation including for orders under: s. 32D(1)(a) requiring or authorising the owners corporation to do any of the things set out in s. 32; s. 32D(1)(b) consenting on behalf of a member of an owners corporation to the doing by the owners corporation of any of the things set out in s. 32.  Section 34D(3) provided that VCAT must not make an order on an application under subsection (1)(b) “unless satisfied that –

(c) the member has … refused consent to the proposed action and— (i) the member owns … more than half of the total lot entitlement; and (ii) all other members of the owners corporation consent to the proposed action; and (iii) the purpose for which the action is to be taken is likely to bring economic or social benefits to the subdivision as a whole greater than any economic or social disadvantages to the member or the group of members who did not consent to the action.”

Section 37 provided –

“37(1) A staged subdivision is a scheme for the subdivision of land in stages.

(2) If a planning scheme or permit authorises a staged subdivision, that staged subdivision may be done— … (b) by using the procedure set out in subsections (3) to (10).

(3) If a planning scheme or permit authorises a staged subdivision and the procedure in this section is used— (a) a master plan must be … lodged for registration …; and … (c) a plan for the second or a subsequent stage may …(i) create additional lots …; (ii) in relation to the land in that stage, create … common property …;

(5) A plan for a second or a subsequent stage may be submitted for certification and lodged for registration … and, if an owners corporation is created on the master plan or a plan for an earlier stage, the unanimous resolution of the owners corporation is not required for any change made to that plan by a plan for a subsequent stage.”

 

Daly AsJ. dismissed the application, holding –

  1. As to the contention that without the consent of the second plaintiff the owners corporation could not rely upon s. 34D of the Subdivision Act to authorise it to pursue the leave application –
    1. it was at least arguable that VCAT’s powers under ss. 34D(1)(a) and (b) were alternative and cumulative, such that the power under s. 34D(1)(a) was not subject to the limitations contained in s. 34D(3); [63]
    2. in any event it was not apparent, having regard to s. 32D(3)(c)(iii), that any application by the owners corporation under s. 34D(1)(b) was bound to fail (whereby VCAT would not authorise the owners corporation suing to compel the developer to vest the community centre lot in the owners corporation). [64]-[65]

Accordingly the court was not confident that there were insuperable obstacles to the owners corporation making good or even bringing its claim for a proprietary interest in the community centre lot, because of failure to comply with s. 32(b) or to obtain an order under s. 34D. [56(a)], [58], [62]

  1. Further, by reason of the Subdivision Act s. 37(5), any additional common property, conferred on the owners corporation by any plan registered upon the completion of a stage of subdivision after the registration of the plan creating the owners corporation, could be accepted without the unanimous resolution of the owners corporation.  However, it was possible that a proceeding to compel a developer to register a plan to give effect to a master plan (designating the community centre lot as common property) fell within s. 32(b) as an action to “otherwise obtain land” and so required a unanimous resolution.  But absent previous judicial authority, it was unnecessary for the court to reach a concluded view upon this and so to conclude that the relevant provisions of the Subdivision Act were an impassable barrier to the owners corporation’s claim. [68]-[69]
  2. Although the draft Statement of Claim was problematical in focusing on representations to and detriment suffered by residents who were neither named as plaintiffs in that document nor caveators, it was unnecessary for the court to determine whether the owners corporation would probably succeed on such claims as articulated. There was evidence of negotiations between the developer and the owners corporation in late 2016 showing that it was the developer’s intention to transfer the community centre lot to the owners corporation and of it in reliance assuming the costs of running the centre. [55], [70]-[71]
  3. Whether any claim by the owners corporation for an interest in the property would be defeated by delay or acquiescence, or whether any equitable interest held by it would by its inaction be postponed to that of the plaintiffs’ as purchasers, was quintessentially for trial. Any delay may be attributable to the assurances of the developer and liquidators, and the show of hands at the residents’ meeting could not reasonably be relied upon as amounting to acquiescence. [73]-[75]
  4. Accordingly the caveator had established a prima facie case of an equitable interest in the community centre lot on the basis of a proprietary estoppel. [55], [76]
  5. The balance of convenience overwhelmingly favoured maintenance of the caveat primarily because, notwithstanding doubt about whether the owners corporation could undertake the works required by the planning permit, removal of the caveat would render its claim futile. [77]
  6. Maintenance of the caveat would not be subject to any conditions. There was no requirement or even a usual practice for an undertaking as to damages to be given. [44], [78]

 

Philip H. Barton

          Owen Dixon Chambers West

Tuesday, April 16, 2024

Blog 57. Amendment of caveat – proprietary estoppel?

Goldberg v Campbell & Shaw and Anor [2022] VSC 24, Randall AsJ (3 February 2022) was the fourth round in the legal bout between Mr Mathers and Mr McColley or his estate.  The first two rounds were at VCAT under Part IV of the Property Law Act (ie co-ownership disputes).  The third round was Matthews AsJ’s decision in Goldberg v Campbell and Shaw & Anor [2021] VSC 647, the subject of Blog 51.  As that decision lies in the background of the decision of Randall AsJ it assists to summarise and supplement it, as follows –

  • Norman Mathers and Alexander McColley were registered proprietors as tenants in common in equal shares of a residential property.  Mathers deposed that they had on 29 March 2005 entered into a deed of arrangement whereby McColley could live there rent-free for life, or until he permanently vacated the property, on the proviso that he execute a will devising his share in the property to Mathers.
  • McColley lived there until August 2016.  He never made the contemplated will.
  • On 10 March 2017 Mathers caveated claiming a freehold estate on the grounds of an agreement with McColley dated 5 August 2016.
  • In the first VCAT decision, on 21 September 2017, the Tribunal found that Mathers had at that time no claim to a freehold estate in McColley’s moiety but also found that Mathers gained ‘a right to an equitable remedy against a threatened disposition of [McColley’s] half interest in the land which would put it out of his power to devise it by will’ under the deed and noted that ‘[p]recisely how the right should be classified is not clear’.
  • The second VCAT decision was dated 21 August 2019.  McColley died on 7 December 2019 leaving a will made in 2008.  Goldberg, who was his executor and beneficiary, obtained probate of this will.

Goldberg sought orders under s. 90(3) of the Transfer of Land Act for removal of the caveat and other relief.  Matthews AsJ ordered removal of the caveat but granted a stay pending any application to amend the caveat, holding –

  1. There was no evidence of an agreement dated 5 August 2016. In any event an application to amend the caveat by amending the date of the agreement to 29 March 2005 would not avail the caveator for various reasons.
  1. However, it was “highly likely that [Mathers] does have a prima facie case that he has a freehold estate in Mr McColley’s half-share of the Property on the grounds of a constructive trust arising from the doctrine of proprietary estoppel” (at [44]). McColley had made a promise as to the future acquisition of ownership of his moiety by Mathers on which Mathers had been induced to rely to his detriment.  This trust came into existence at the time of reliance: a credible argument existed that the constructive trust came into existence when McColley commenced living at the property rent‑free after entering into the deed, or possibly the trust came into existence when McColley made his will.
  1. The balance of convenience favoured maintenance of the caveat provided it was amended to assert this trust.

The caveator duly filed a summons under s. 90(3) to amend the grounds of claim in the caveat by substituting for ‘agreement with the following parties and date’ ‘constructive trust arising from the doctrine of proprietary estoppel’ or ‘implied, resulting or constructive trust’ or ‘estoppel’.  Despite Matthews AsJ’s use of the words “high likelihood” Randall AsJ refused to allow the amendment.

Randall AsJ held –

  1. The court had power to amend the grounds of claim in a caveat. [26]
  2. In determining the amendment application the court would consider four factors. The first was the nature of the amendment, ie whether to amend the interest claimed and not just the grounds of claim or the scope of the protection.  In favour of the caveator this application was only to amend the grounds. [30]
  3. The second factor was the circumstances in which the error was made. As to this:
    1. From the words quoted above in VCAT’s first decision it was clear that the Tribunal considered that the deed provided some kind of right to Mathers. It was accordingly reasonable for Mathers to understand that the deed was the basis of the caveatable interest, particularly as the court noted the caveator’s submission that a fine distinction existed between the deed being the source of the proprietary interest and the deed containing a promise of the proprietary interest by reason of a constructive trust arising from proprietary estoppel. [37]
    2. It was not unreasonable to infer that Mathers’ solicitors had advised him that he had a freehold estate in the property arising from the deed. By deposing that the solicitors had advised him to lodge a caveat Mathers had probably not waived privilege. [39]-[40]
    3. The circumstances of the error in the grounds of claim did not favour either party given that after the VCAT proceedings there was on the one side no application to remove, and on the other side no application to amend, the caveat. [38], [41]
  4. The third factor was the principle that the Court ‘should not readily act in a way which might encourage the belief that caveats could be imprecisely formulated and then “fixed up later”’. The amendment would simply clarify the basis of the freehold estate claimed in the caveat and the court again noted the matters set out in Holdings 3a and 3c.  The third factor accordingly did not defeat the caveator. [45]-[47], [115]
  5. The fourth factor was the overall merits of the claim for a caveatable interest as sought by the amendment, engaging the same considerations as on an application for the removal of a caveat in the terms sought. To establish proprietary estoppel Mathers had to establish the following elements ([90]), stating also the outcome:
      1. A representation by McColley that he would confer an interest in property on Mathers.
        This representation was made in the deed and the fact that it was subject to contingencies was irrelevant. [92], [94]
      2. Mathers reasonably believed or expected that he presently had, or in the future would acquire, an interest in the property.
        The representation being expressly in the deed, this element was established. [95]
      3. McColley knew or intended that Mathers defendant would hold that belief or expectation and would act or abstain from acting in reliance on it.
        Given that the deed was executed by both men this element was established. [96]
      4. That Mathers reasonably acted to his detriment and changed his position in reliance on his expectation or belief. As to this –
        1. Mathers carried the burden of proof. [97]
        2. In certain previous cases the representees had improved the property and rendered services to the representors. Mathers did neither but simply contended that he permitted McColley to live in the property rent-free alone, it being however highly unlikely that Mathers would if the representation had not been made have lived there, and that he refrained from applying for its sale and division of proceeds, there being however no evidence that he intended to exercise this right and indeed he had opposed it. [100], [109]
        3. Generally one co-owner was not required to pay rent to another co-owner for use and occupation of a property.  Exceptions to this were: actual ouster; constructive ouster; a claim by the occupant for contribution for improvements to the property; breakdown of relationship rendering cohabitation unreasonable or not practicably sensible. These exceptions were inapplicable.  The other exception was where there was a lease between the occupying and non-occupying co-owner.  However, the deed did not constitute a lease because it did not confer exclusive possession.  Accordingly the fact that Mathers did not claim rent was irrelevant because McColley was not liable to pay it anyway. [101]-[108]
        4. Mathers had not voluntarily contributed to the maintenance and upkeep of the whole of the property. He successfully claimed half those costs in the second VCAT proceeding. [110]

        Accordingly Mathers failed on this issue. [111]

      5. The detriment was such that it would be unconscionable for McColley’s estate to depart from his representation.
        By reason of (d) this element was not established. [111]

Accordingly Mathers had not established a prima facie case of proprietary estoppel to support the proposed amendment [112], [115].  It was unnecessary to consider whether there was a prima facie case of a constructive trust arising by reason of proprietary estoppel [112].

Comment: In [112] the court appears to draw a distinction between proprietary estoppel and constructive trust arising by reason of proprietary estoppel.  However, proprietary estoppel gives rise to a constructive trust – see Blog 54 and McNab v Graham [2017] VSCA 352. 

       Philip H. Barton

          Owen Dixon Chambers West

        Thursday, June 2, 2022

Blog 54. Proprietary estoppel/Trusts

Groom v Leafbusters Pty Ltd (in liq) [2021] VSC 765, Cavanough J (20 November 2021).

Olsen v Olsen [2022] VSC 95, Ierodiaconou AsJ, (1 March 2022).

Konkoly v Konkoly & Anor [2022] VSC 74, Irving AsJ, (23 February 2022).

These cases concern trusts, mainly what Cavanough J compendiously described as the “common intention constructive trust (by way of proprietary estoppel)” (Groom v Leafbusters Pty Ltd (in liq)) at [4].  In that case caveats were lodged over a property based on various forms of trust.  In a long judgment following a final hearing, ie not a proceeding under the Transfer of Land Act s. 90(3), Cavanough J found that the claims of the caveator to an interest in land failed on the facts.  His Honour also stated certain legal points, one of which was engaged in the other two cases which were proceedings under s. 90(3).  In Olsen the caveator established a serious question to be tried of an interest in land based on proprietary estoppel or a constructive trust.  In Konkoly the caveator failed to establish a serious question to be tried of any interest in land. Continue reading “Blog 54. Proprietary estoppel/Trusts” →

Blog 51. Promise to make will in favour of caveator – Whether creating interest in land – But constructive trust based on proprietary estoppel.

Goldberg v Campbell and Shaw & Anor [2021] VSC 647 (8 October 2021), Matthews AsJ.  is the third round in the legal bout between Mr Mathers and the late Mr McColley.  The first two rounds were at VCAT under Part IV of the Property Law Act (ie co-ownership disputes): [2017] VCAT 1529, Mathers v McColley [2019] VCAT 1230.  See generally on Co-ownership Disputes the author’s paper on Foley’s site in June 2020.  The facts were –

  • The second defendant (Mathers) and Alexander McColley were registered proprietors as tenants in common in equal shares of a residential property.  Mathers deposed that they had on 29 March 2005 entered into a deed of arrangement whereby McColley could live there rent-free for life, or until he permanently vacated the property, on the proviso that he execute a will devising his share in the property to Mathers.
  • McColley lived there until August 2016 when he went into a nursing home.  He never made the contemplated will.
  • On 10 March 2017 Mathers caveated claiming a freehold estate on the grounds of an agreement with McColley dated 5 August 2016.
  • McColley died in 2019 leaving a will made in 2008.  The plaintiff, who was his executor and beneficiary, obtained probate of this will.  This half interest was the main asset of the estate.  In 2021 McColley’s daughter commenced a proceeding under Part IV of the Administration and Probate Act against the estate for testator’s family maintenance.

The plaintiff sought orders under s. 90(3) of the Transfer of Land Act for removal of the caveat and under Part IV of the Property Law Act for sale of the property and division of the proceeds.  The first defendant, a firm, were Mathers’ solicitors.

Matthews AsJ ordered removal of the caveat but granted a stay pending any application to amend the caveat, holding –

  1. There was no evidence of an agreement dated 5 August 2016. In any event an application to amend the caveat would have been futile because, assuming the deed was valid and enforceable, Mathers only had a contractual right to its performance sounding in damages.   Further, even a will of McColley devising his moiety would not have given Mathers a proprietary interest in that moiety, but merely a right to an order for due administration of the estate.   And even if there had been such a devise, the moiety would have been part of the estate subject to the claim for testator’s family maintenance. [34]-[40], [43]
  1. However, it was highly likely that Mathers had a prima facie case of a freehold estate in the moiety on the grounds of a constructive trust arising from the doctrine of proprietary estoppel. McColley had made a promise as to the future acquisition of ownership of his moiety by Mathers on which Mathers had been induced to rely to his detriment.  This trust came into existence at the time of reliance: while it was for a court to determine whether to declare the trust, the equitable interest arose from the date when the detrimental reliance rendered it unconscionable to depart from the promise.  There was a credible argument that the constructive trust came into existence when McColley commenced living at the property rent‑free after entering into the deed.  It was also possible that the trust came into existence when McColley made his will. [44]-[53]
  1. The balance of convenience favoured maintenance of the caveat provided it was amended to assert this trust. This supported a possible future order for transfer of McColley’s moiety to Mathers. [61]
  1. For identical reasons to those concerning the balance of convenience, any application for an order for sale under the Property Law Act Part IV was premature. [69]

      

Philip H. Barton

Owen Dixon Chambers West

     Tuesday, October 19, 2021