Category: Constructive trust – Common intention

Blog 96. Prima facie case of implied, resulting or constructive trust but caveat removed on balance of convenience.

Barnard v Otten [2025] VSC 313, Irving AsJ (3 June 2025)

The facts were as follows –

  • Rhianna Otten was the daughter of Sharon Otten and sister of Declan Otten. Rhianna was until her death on 1 April 2024 the partner and fiancée of the plaintiff (Carl) (the couple).  Carl deposed –
    • Before 2018 the four of them discussed purchasing a property, including initially in Rhianna’s name, then to be subdivided and part be transferred into Sharon’s name. But the couple did not pursue this because of difficulty finding land and cost.
    • Rhianna and Declan opened a joint bank account (the joint account) into which Sharon made deposits. This account was not used to pool funds for a property purchase.  Sharon and Rhianna did not agree to purchase a property.
    • In around 2020 the couple purchased a house at Corio (the Property) for $416,000, negotiated by Rhianna, using a loan from a financier secured by first mortgage and an $85,000 gift from the sale of Sharon’s house at Melton described by Sharon as an ‘early inheritance’. Rhianna became its registered proprietor.  The couple and children lived in the house.
    • With the couple’s agreement Sharon purchased, he believed using her proceeds of sale, and placed, a moveable granny flat onto the Property, into which Sharon and Declan moved in mid-2021, living rent free and not contributing to mortgage repayments.
    • Until 1 April 2024 the couple made all mortgage repayments, being about $80,000, from their joint finances and also paid all rates, insurance and utilities bills. Sharon paid for gas supply to the granny flat.
  • On the other hand Sharon deposed –
    • Following the sale of her property she had approximately $220,000.  She agreed to Rhianna and Declan opening a bank account in their names so that she (Sharon) could make deposits to protect that money from her other daughter Taylah.  She paid $100,000 into this joint account in October 2018.
    • In 2018 Sharon and Rhianna began discussing property purchase. She (Sharon) suggested finding land with subdivision potential, to be purchased in Rhianna’s name and then subdivided so that sufficient for a granny flat could transferred into her (Sharon’s) name.  They then involved Declan and Carl in their discussions.
    • She paid $70,700 into the joint account in November 2019 and a further $25,907.50 between March 2018 and February 2020.
    • The four persons created a Facebook group chat containing discussions about purchasing a property together.
    • On 16 December 2020 the Property was purchased in Rhianna’s name using her (Sharon’s) contribution of $85,000 and the mortgage loan.
    • She neither sought legal advice nor caveated because she was clear about her agreement with Rhianna. The couple and the children moved into the Property.   The granny flat was subsequently constructed using Sharon’s funds from the joint account and she and Declan moved in.  They did not contribute to loan repayments.
    • The granny flat was not portable and its cost of relocation would exceed initial construction costs.
    • At least fortnightly Rhianna borrowed money from Sharon and Declan for living expenses.
  • Rhianna died intestate. Subsequently her aunt made one mortgage repayment.  Carl became registered proprietor of the Property in his capacity as administrator of Rhianna’s estate.  The mortgage was in default with interest accruing inducing a default notice.  Carl engaged an agent to sell the Property, requiring vacant possession.
  • Carl and Sharon were in dispute about possession of the Property. The mortgagee issued notices to vacate to her.
  • Sharon caveated over the Property claiming an implied, resulting or constructive trust with an absolute prohibition on dealing with it.
  • Carl applied under the Transfer of Land Act 903 for removal of the caveat. He also sought possession, which was dismissed because the Property had been vacated.

Irving AsJ ordered removal of the caveat, holding –

  1. A joint endeavour constructive trust arose where there was a joint relationship or endeavour; an asset was acquired in the course thereof; the joint relationship or endeavour was prematurely terminated; one party had made financial or non-financial contributions for the purpose thereof; and it would be unconscionable to permit the other party to retain the benefit of the relevant property where the contributions were made in circumstances where it was not specifically intended that the other party should so enjoy it. [49]
  2. A common intention constructive trust arose where there was a common intention or understanding that a person would acquire an interest in property and that person has acted to his or her detriment in reliance on that intention or understanding. [50]
  3. Equity would presume that a person held property on resulting trust, proportionate to the contribution, where another person contributed to its purchase and the property was held in the name of the first person. If the contributor was the parent of the person holding the property, a rebuttable presumption of advancement arose. [51]
  4. The caveator established a prima facie case of an interest in the Property by virtue of an implied, resulting or constructive trust, because –
    1. her evidence was of providing monies pursuant to an agreement with the couple to purchase a property together sufficient to subdivide and accommodate a granny flat for Sharon and Declan;
    2. her provision of $85,000 in purchase monies was undisputed, although the evidence of whether this was a gift to Rhianna conflicted;
    3. a granny flat was established which Sharon and Declan occupied;
    4. notwithstanding Carl disputing any agreement to jointly purchase the Property, and that the $85,000 was a contribution and not a gift, a prima facie case of Sharon’s asserted interest sufficed;
    5. conflicts in evidence were to be resolved at trial.

[7], [66], [73]

  1. However, the balance of convenience favoured removal of the caveat because: the mortgagee’s intention to sell the Property was undisputed and the caveat depressed the price; although the caveat claimed an absolute prohibition Sharon’s interests in the Property were at most not asserted to be to the whole Property; Sharon could claim on the funds remaining after the mortgagee was paid out. [7], [67]-[71], [73]

Philip H. Barton

Owen Dixon Chambers West

Tuesday, August 05, 2025

Blog 94. Common Endeavour Constructive Trust.

This Blog deals with RNC Nominees Pty Ltd v Trotter [2025] VSC 207 in which Gray J., after considerable analysis, found a prima facie case of a common endeavour constructive trust over three properties and, on an exhaustive consideration of the balance of convenience, declined to remove caveats.   This case was shortly succeeded by Trotter v RNC Nominees Pty Ltd [2025] VSC 224, which concerned an application for an injunction and will be the subject of the next Blog.

RNC Nominees Pty Ltd v Trotter [2025] VSC 207, Gray J.

The facts were –

  • The defendant’s husband, Gary Trotter (Gary), was the sole registered proprietor of three rural properties being ‘Hemphills’, ‘South-East’ and ‘Woods’. Two of these properties were largely black clays as was most of the third property.
  • A first registered mortgage over the properties was held by the National Australia Bank (NAB). In 2023 Gary mortgaged over 10 properties in total, including the three properties, owned by him or by associated persons or entities, operated as a farming business, to the plaintiff (RNC).  The mortgages were registered as second mortgages.   They secured money owed under a facility agreement between RNC and each of Beverly Farming Pty Ltd (Beverly Farming), Gary, the defendant Lorna Trotter (Lorna), and their son Andrew (Andrew), dated 24 May 2021.
  • On around 4 April 2024, Gary and Lorna, RNC and others entered a deed of forbearance. This deed recorded RNC’s debt as $7,197,591.97.  Lorna was an obligor under a relevant agreement and also a guarantor of this debt.
  • On 1 May 2024 RNC issued a default notice for $7,385,926.38 plus interest.
  • On 6 May it as mortgagee entered into possession of the three properties and other mortgaged properties and appointed agents, they also being receivers and managers of Beverly Farming.
  • On 21 February 2025 RNC entered into three contracts of sale of the three properties due for settlement on 7 April 2025. Special condition 18 in each contract provided that if the vendor was delayed or prevented from completing the contract by a caveat it could extend settlement for up to 6 months to enable it to remove the caveat or take other steps necessary to transfer title.
  • On 18 March 2025 Lorna caveated over each property on the grounds of ‘implied, resulting or constructive trust’.
  • As at 2 April 2025, the estimated payout figure under the NAB mortgage was $4,762,745.15.
  • RNC applied under the Transfer of Land Act s. 90(3) for removal of the caveats.
  • The caveator deposed –
    • When she married in 1974 Gary already owned Woods and owed certain debts. They soon bought another property registered in their joint names;
    • They had run a farm in partnership since their marriage, being a formal partnership between them from 1976, also conducted for 16 years to 2012 with Gary’s brother and his wife;
    • From the 1990s the brothers jointly owned Hemphills and another property. Gary became their sole registered proprietor in about 2012;
    • Gary acquired a further property in 1994;
    • Gary was given South-East by his mother in 2004;
    • The farming partnership was conducted on all these properties;
    • She contributed to work for the farming business in various ways, including on the three properties, this evidence being quite general;
    • During their marriage she and Gary always understood that they owned everything together and the farm properties were joint marital assets, this evidence being quite general.
  • Andrew deposed to a family understanding that his parents had contributed equally to their marriage, and that properties held in his father’s name were owned by each equally.
  • On 2 April 2025 Andrew obtained valuations (the valuations) of the three properties at $6,525,000 in total, which if attained would leave about $1.7 m. for RNC after discharge of NAB’s mortgage.
  • In an affidavit filed on 2 April, being the evening before the hearing, Andrew criticized the sales process including the marketing campaign. He gave oral evidence expressing further concerns, without objection or cross-examination.
  • Andrew gave evidence: of a record sale in February 2025 of a nearby property (Lot 5) rich in ‘black soil’, which he suggested would increase the values of the properties; and that a week after that sale the receivers and managers told him that they would enter contracts of sale unless they received unconditional refinancing offers that day. The valuations had referred to sales in the previous 24 months but not to the sale of Lot 5.  But they did refer to a recent sale of a property rich in black clays for $19,920 per hectare.  However, for location reasons the valuation did not ascribe this figure to the properties, though nonetheless ascribing relatively high values to attain $6,525,000.
  • Andrew’s affidavit exhibited a solicitor’s letter disputing the three contracts and referred to a financing agreement between RNC and Beverly Farming, allegedly breached by RNC and thus invalidating all its actions including appointment of the receivers and managers. The letter foreshadowed an application for an injunction and requested a delay in settlement.
  • Andrew gave evidence of steps taken to refinance all mortgage debts.

RNC did not tender evidence of sale prices but provided a confidential exhibit to the court before the hearing and sought to apply ex parte for it to be kept confidential.  The court required a formal application on summons supported by affidavit(s); this did not occur; and the confidential exhibit was not filed but a redacted version was filed not disclosing the purchasers or the prices.  Counsel for the caveator applied for disclosure, ultimately of just the sale prices.  Counsel for RNC submitted that the identities of the purchasers and the prices were market-sensitive information that might depress the future prices of the remaining seven properties.

Gray J. declined to remove the caveats, holding –

  1. The evidence supporting the existence of a joint endeavour constructive trust under which the caveator was a beneficiary, based on Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78 and Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59, was very superficial. The mere fact that the farming partnership involved the couple and that its operations occurred on various pieces of land did not give the caveator an interest in any particular piece of land.  Nonetheless, she had established a weak prima facie case of this trust.  However, this was the court’s preliminary view, based only on her limited evidence, uncorroborated by Gary and without RNC having a meaningful opportunity to respond.  This evidentiary weakness was also relevant to the balance of convenience. [21], [22], [25], [26], [27], [42], [43], [83]
  2. A joint endeavour constructive trust only arose where the substratum of a joint relationship or endeavour was removed without attributable blame, and where the benefit of money or other property contributed by one party on the basis and for its purposes would otherwise be enjoyed by the other party in circumstances not specifically intended or specially provided for, equity then preventing that other party from asserting or retaining this benefit to the extent unconscionable. In this case –
    1. The couple remained married and their farming endeavour had not come to an end or been ‘removed’; [30], [31]
    2. It was however debatable whether the farming endeavour continued, at least in its intended form: the appointment of receivers and managers and the control of the land by agents of the mortgagee in possession had arguably ‘removed’ the ‘substratum’; [31]
    3. This raised whether a joint endeavour constructive trust could be asserted against someone other than the ‘other party’ to the endeavour, in circumstances where that ‘other party’ was not the one retaining the benefit of the property – and whether in those circumstances it could be said to be ‘unconscionable’ for a third party mortgagee to ‘assert or retain the benefit of the relevant property’; [32]
    4. The court’s preliminary view was that these factors did not prevent the trust arising. Nonetheless, the court acknowledged: that Lorna’s asserted equitable interest arose because of the operation of the doctrine on the conscience of the sole registered proprietor Gary; RNC’s position was different, as its registration conferred indefeasibility on its rights, notwithstanding Lorna being beneficiary of a constructive trust, subject only to fraud or to an in personam claim by Lorna, neither being asserted here; and accordingly RNC’s interests probably had priority over Lorna’s asserted equitable interests; [34]
    5. Although these considerations did not preclude recognition of Lorna’s equitable interest they were relevant to the balance of convenience. [35]

    [30]

  3. Although some cases had treated the joint endeavour constructive trust as superseding the common intention constructive trust, and some cases conflated them, the Supreme Court had treated the latter as a distinct doctrine. Having found a prima facie case of a joint endeavour constructive trust it was strictly unnecessary for the court to form a view on the existence of a common intention constructive trust, but if it existed its prospects of success were no stronger than those of establishing a joint endeavour constructive trust. [24], [25]
  4. Any proprietary interest held by Lorna existed even if there was no basis for subordinating RNC’s registered interests to her alleged interests or whether she might receive any return from the sale (also possibly relevant being that she was jointly and severally liable for Gary’s debt). [36]-[41]
  5. As to the application for disclosure of the sale prices –
    1. Section s. 90(3) of Transfer of Land Act did not confer jurisdiction to order production of the sale price information – it was unclear that s. 90(3) extended to procedural, interlocutory orders of this kind – it may be limited to dispositive orders relating to the caveat or dealings with the land; [48]
    2. But the court had power to order disclosure of documents (in unredacted form) in the nature of discovery orders under the Supreme Court (General Civil Procedure) Rules 2015 or the Civil Procedure Act 2010. Perhaps the court could have ordered discovery, but that power had not been invoked here; [49]
    3. The parties did not address whether RNC’s concerns could be allayed by the caveator agreeing to keep market-sensitive information confidential. Absent such safeguards, the court was disinclined to exercise its power, assuming it existed, to order disclosure of the prices. [50]
  6. In contrasting the potential injury to the respective parties from the caveats remaining or being removed, or (in other words) taking whichever course appeared to carry the ‘lower risk of injustice’ should the course chosen turn out to have been ‘wrong’, the balance of convenience favoured maintenance of the caveats at least for a limited time, on balancing:
    1. The weakness of Lorna’s prima facie case; [43], [63]
    2. The non-disclosure of prices – this led the court to assume in the Lorna’s favour that the prices were substantially below the valuations. Importantly, this non-disclosure supported her having further time to consider whether to sue RNC and the agents for breach of their duties.  On the assumption that the sales were for an undervalue, the removal of the caveats and consequent completion of the contracts could prejudice her as she was jointly and severally indebted to RNC for much more than the proceeds of sale, even if $6.525 m. had been achieved; [51], [52], [65], [66]
    3. A mortgagee exercising a power of sale under the Transfer of Land Act s. 77 owed duties at least to the registered proprietor and maybe also to the holder of an equitable interest through the registered proprietor. But even assuming the sales were well below $6.525 m. Lorna had not articulated a clear claim relating to the sale process; [55], [56]
    4. Nevertheless, because this was an urgent Practice Court application akin to an injunction application the court would on the balance of convenience weigh Andrew’s evidence about the sale process and alleged undervalue, notwithstanding that it was untested and that inferences of misconduct were impermissible against the agents, who were officers of the Court, without proper notice of this assertion and lack of evidence of breach of duty; [57]-[62], [64]
    5. The indefeasibility of RNC’s mortgage and the subordination of Lorna’s asserted equitable interests to repayment of RNC’s debt; [63]
    6. On an application for an injunction the court would consider whether damages were an adequate remedy. However damages were not an adequate remedy where rights to land were concerned.  Lorna may assert an interest over approximately seven other titles, and so even if it was inevitable that the current sales would give her no return, she could suffer prejudice from their sale at undervalue in the form of enjoyment of  her asserted equitable interests in the other properties.  As all the titles covered the farming business, and given the presumption of the special nature of an interest in land, damages were inadequate, or at the very least this was arguable; [67]-[69]
    7. The solicitor’s letter, which concerned the related dispute between RNC and Beverly Farming, carried no weight; [74]
    8. There was no convincing evidence of prejudice to RNC if the settlement was delayed, special condition 18 having very significant weight; [76], [77]
    9. There was no evidence that delay in repayment of RNC’s loan would cause it loss – the lapse of 9 months between its entry into possession of the land and into the contracts of sale could be due to market conditions or suggestive of no pressing need for a sale; [78], [79]
    10. The court gave little weight to Andrew’s refinancing evidence because it was superficial, unlikely to succeed within the next few weeks, and if Lorna had caveated simply based on needing additional time for refinancing this would be perilously close to an attempt to use a caveat as a ‘bargaining chip’; [81], [83]
    11. In summary the potential prejudice to Lorna of removing the caveats outweighed the lack of any imminent prejudice to RNC in maintaining them, provided she undertook to within a reasonable time, suggested by the court to be two months, sue the agents or RNC for alleged breach causing sales at an undervalue. The application for removal of the caveats would then return to court for further consideration. [84]-[87]

[62]

  1. Caveats should be proportionate and properly adapted to the interests sought for protection. Consideration should be given to amendment so that these caveats did not prohibit any dealings absolutely and without qualification. [88]

Philip H. Barton

Owen Dixon Chambers West

Tuesday, June 3, 2025

 

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 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]

  1. 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]
  2. 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

Blog 74. Leave to appeal against Blog 65 refused

Dolan v Dolan [2023] VSCA 136, Court of Appeal.

In this case the Court of Appeal refused leave to appeal from the decision of Ierodiaconou AsJ ([2022] VSC 543) the subject of Blog 65.   The Court of Appeal decision is particularly helpful because the court summarises a number of basic caveat litigation points arising under the TLA s. 90(3), namely:

  1. An application under s. 90(3) is interlocutory in nature, requiring application of the two-stage test of serious question to be tried and balance of convenience, not ordinarily requiring final determination of disputed factual issues or claims, and not giving rise to an issue estoppel or res judicata (although an application under s. 90(3) may amount to an abuse of process).
  2. Where an arguable case is established the caveator is generally required to commence a proceeding with a Writ and pleadings.
  3. As to admissibility of evidence.
  4. That an order removing a caveat to permit sale, with part of the sale proceeds being held on trust pending final determination of the dispute, may be appropriate where the caveator was not in possession or where the claimed interest conferred no possessory right, but may be inappropriate where the claimed interest, of which there was a serious question to be tried, conferred possessory rights or represented the whole or a substantial proportion of the beneficial proprietary interest.

It is helpful first to set out the original decision, commencing with the facts particularly relevant to the appeal –

  • In about 1998 the first defendant (Christine) and other persons purchased land at Lorne (the parent title) for $105,000 with Christine being registered as to a half interest.   They agreed to subdivide it into two blocks, with her taking one.  She deposed that she contributed $52,500 towards the purchase.  The plaintiff (Shannan), who was Christine’s daughter, deposed that she (Shannan) contributed $20,000 towards the purchase.
  • Due to her age and income Christine could not obtain a loan to fund construction of a house.   However, a Bendigo Bank employee advised that if she transferred her interest in the parent title to Shannan an acceptable loan could be secured in Shannan’s name.  Christine deposed that Shannan accepted her proposal to make this transfer so that Shannan could obtain a loan on Christine’s behalf, but that both before and after subdivision she (Christine) would continue as beneficial owner, and that Shannan also accepted other proposed terms relating to the transfer.  Shannan denied accepting this proposal.
  • In 2001 Christine transferred her moiety in the parent title to Shannan, the consideration stated in the Transfer being as “An Agreement to Transfer”.   Following subdivision, one block (the property) was transferred to Shannan, the consideration in that Transfer being stated as “In pursuance of an Agreement between the Transferors for partition of the said land …”, and Shannan in 2003 became registered proprietor of this block.  The bank established a loan account in Shannan’s name with an overdraft limit of $140,000 secured by a mortgage.
  • Christine deposed that the costs for acquisition of the parent title and construction and fit‑out of the house were funded primarily from her personal resources and from the loan account, Shannan only contributing about 7% of overall build costs.   Christine also deposed to making mortgage repayments and that she paid all outgoings including council rates, home insurance, and for maintenance and improvement.  Shannan deposed that the overall build costs were largely drawn down from the loan account, that from 2004 to 2006 she made loan payments, and that Christine did not use her personal resources to fund overall build costs.
  • Upon completion of the house in 2003/2004 Christine, Shannan, and another family member took up residence.  Shannan left in 2006.  In 2021 Christine caveated on the ground of ‘implied, resulting or constructive trust’.  Shannan applied under the Transfer of Land Act s. 90(3) for removal of the caveat.

Ierodiaconou AsJ dismissed the application, holding –

  1. There was a serious question to be tried that Christine was the beneficiary of a common intention constructive trust (she alleged as to 93% of the equitable title). This was supported by: her deposing to the required common intention or agreement; reference to an agreement in the Transfer (her Honour appears to state in the Transfer to Shannan of the subdivided block, but quaere this is a slip for the Transfer to Shannan from Christine); and Christine’s contribution to loan repayments.  Moreover, it appeared to be common ground that Christine contributed most of the purchase price of the parent title and that for many years she made payments into the mortgage loan account and resided on the property.
  2. There was a serious question to be tried that Christine was the beneficiary of a resulting trust (she alleged as to 65% of the equitable title) arising from her contributions to the purchase price of the parent title and to construction and fit-out.
  3. The balance of convenience favoured maintenance of the caveat because of: Christine’s long residence; her age being elderly; evidence of her investing her life savings into the property; the fact that Shannan proposed to sell the property with vacant possession with only $20,000 from the net proceeds being distributed to Christine pending resolution of the dispute; Christine’s claim of a substantial interest in the property; and Christine’s inability to buy another property or rent one in Lorne.  Any hardship for Shannan could be met by Christine’s undertaking to maintain mortgage and property expense payments, which would maintain the status quo of many years, and Christine being required within 7 days to commence a proceeding to establish her interest in the property.

The Court of Appeal refused leave to appeal, holding –

  1. The decision at first instance was discretionary and to impugn it the applicant must establish an error of a kind explained in House v The King (1936) 55 CLR 499. [83]
  2. The proposed ground of appeal that the Associate Judge had conducted a “trial” of the Originating Motion (without the applicant being aware of it) and had not just heard the Summons, whereby the final orders created an issue estoppel or res judicata that Christine had a caveatable interest, was misguided and a distraction. The true issue was that the nature of the order made, ie to refuse to order removal of the caveat, reflected in the conclusion in the order dismissing the summons, was interlocutory in nature, in the sense that it did not finally determine any rights in the property.  It was interlocutory because the relief sought was under the Transfer of Land Act s. 90(3) requiring the caveator to establish a serious question to be tried of an estate or interest in the land and that the balance of convenience favoured the maintenance of the caveat until trial.   An application for removal of a caveat did not ordinarily present an occasion for the final determination of disputed factual issues or claims.  Not only was it usual for an application under s. 90(3) to be by Summons or Originating Motion, and for it to be determined by the two-stage test, but where an arguable case was established the caveator was generally required to commence a proceeding to have the claim to an interest in the land determined in a properly constituted suit with a Writ and pleadings.  An Originating Motion was ill-suited to such a dispute and there may be no utility in keeping it on foot. [47]-[55]
  3. The Associate Judge had applied these principles. She had not determined whether the applicant had any equitable interest in the property, but done no more than dismiss the Summons.  No issue estoppel or res judicata [56], [57], [60], [61]
  4. However, in the absence of a relevant change in circumstances, an application to remove the caveat may be an abuse of process. [62]
  5. The submission that the Associate Judge was not entitled to rely on matters stated in a draft Statement of Claim exhibited to and repeated in a paragraph of an affidavit, and in particular the pleading of an agreement between Christine and Shannan, was rejected. The fact that a paragraph in an affidavit was in the same form as a pleading was inconsequential.  Admissibility of the paragraph was determined by reference to the Evidence Act 2008.  Although the form of the paragraph was open to the criticism that it was conclusionary it was admissible because the evidence was relevant and on its face came from the deponent’s personal knowledge.  The evidence was capable of reasonably bearing upon whether there was a triable issue of an agreement or understanding reflecting a common intention as to the beneficial ownership of the property.  The other evidence of an agreement included the change in title, the payment by Christine of part of the purchase price of the parent title and construction costs, and the fact that she continued to occupy the property without paying rent.  In any event, counsel had conceded before the Associate Judge that he was ‘not going to argue that there isn’t a prima facie case here in relation to the caveat’. [65], [71]-[75]
  6. The proposed ground of appeal that the Associate Justice should have determined that at best Christine was entitled to a lesser equitable remedy, ie an order requiring Shannan to hold some of the sale proceeds on trust pending final determination of the dispute, was not established. The Associate Justice was correct in concluding that Christine had raised a serious question to be tried that she held a beneficial interest in the property.  As to the balance of convenience, the caveat itself did not confer any rights on Christine to occupy the property for the purpose of the caveat nor (although likely to affect the ability to sell and price) prevent sale. [42], [84]-[89]
  7. In considering whether the balance of convenience favoured the retention of the caveat, it was necessary to consider the nature of the claimed interest and what the caveat was designed to protect. In cases where the caveator was not in possession or where the claimed interest conferred no possessory right, the claimed proprietary interest may be adequately protected by removing the caveat, allowing the property to be sold and, by orders or undertakings, for the proceeds or part of them to be secured until the respective interests in the property can be determined.  Conversely, where the claimed interest conferred possessory rights or represents the whole or a substantial proportion of the beneficial proprietary interest, it may be appropriate to maintain the caveat and so not alter the registered title pending trial.   In this context two points required examination –
    1. Did the interest claimed by Christine give her a possessory right to the property? On her primary case, she claimed to own 93% of the beneficial interest based on a common intention constructive trust. She had also been in possession since the construction of the house.  In those circumstances it was arguable that the equitable interest would follow the legal interest and give her a right to possession. Alternatively, establishment of her right to equitable relief may arguably also found an order restraining Shannan from evicting her.
    2. In her draft pleading and in her submissions at first instance Christine accepted that the property should be sold but only after determination of the respective equitable interests. Shannan’s submission that, in circumstances where both parties sought sale and distribution of proceeds, it was (necessarily) wrong for the caveat to remain was invalid.  It was open to the Associate Judge to conclude that the caveat should not be removed before the determination of equitable interests because the practical effect this would be a sale and transfer of title with the real risk of an order for possession against Christine.  Christine’s ability to secure alternative accommodation was heavily dependent on her knowing the extent of, and being able to realise, any interest she may have in the property, accordingly the status quo plainly favoured retention of the caveat.  And if Christine was successful on her primary claim and Shannan has no more than a 7% beneficial interest Shannan’s interest may possibly be satisfied without sale.  [90]-[93], [96]-[99]
  2. The Associate Judge was alive to possible prejudice to Shannan from maintenance of the caveat including exposure to mortgage repayments. She correctly decided that the undertakings proffered by Christine to pay certain amounts were adequate to meet any prejudice.  An application to lead fresh evidence to the effect that the mortgage had been in arrears was refused. [100], [102], [103]

Philip H. Barton

Owen Dixon Chambers West

Tuesday, July 25, 2023

 

Blog 65. Mother v Daughter. Mother’s caveat based on constructive or resulting trust survives.

Dolan v Dolan & Anor [2022] VSC 543, Ierodiaconou AsJ, (14 September 2022) concerns a dispute between mother and daughter over property of which the daughter was registered proprietor, the mother being held to have a caveatable interest based on a constructive or resulting trust.  The facts were –

  • In about 1998 the first defendant (Christine) and other persons purchased land at Lorne (the parent title) for $105,000 with Christine being registered as to a half interest.   They agreed to subdivide it into two blocks, with her taking one.  She deposed that she contributed $52,500 towards the purchase.  The plaintiff (Shannan), who was Christine’s daughter, deposed that she contributed $20,000 towards the purchase, and it was common ground that Shannan paid Christine $20,000 at about the time of purchase.
  • Due to her age and income Christine could not obtain a loan to fund construction of a house.   However, a Bendigo Bank employee advised that if she transferred her interest in the parent title to Shannan an acceptable loan could be secured in Shannan’s name.  Christine deposed that Shannan accepted her proposal to make this transfer so that Shannan could obtain a loan on Christine’s behalf, but that both before and after subdivision she (Christine) would continue as beneficial owner, and that Shannan also accepted other proposed terms relating to the transfer.  Shannan denied accepting this proposal.  .
  • In 2001 Christine transferred her moiety in the parent title to Shannan, the consideration stated in the Transfer being as “An Agreement to Transfer”.   Following subdivision, one block (the property) was transferred to Shannan, the consideration in that Transfer being stated as “In pursuance of an Agreement between the Transferors for partition of the said land …”, and Shannan in 2003 became registered proprietor of this block.  The bank established a loan account in Shannan’s name with an overdraft limit of $140,000 secured by a mortgage.
  • Christine deposed that the costs for acquisition of the parent title and construction and fit‑out of the house were funded primarily from her personal resources and from the loan account, Shannan only contributing about 7% of overall build costs.   Christine also deposed to making mortgage repayments and that she paid all outgoings including council rates, home insurance, and for maintenance and improvement.  Shannan deposed that the overall build costs were largely drawn down from the loan account, that from 2004 to 2006 she made loan payments, and that Christine did not use her personal resources to fund these costs.
  • Upon completion of the house in 2003/2004 Christine, Shannan, and another family member took up residence.  Shannan left in 2006.  In 2021 Christine caveated on the ground of ‘implied, resulting or constructive trust’.  Shannan applied under the Transfer of Land Act s. 90(3) for removal of the caveat.

Ierodiaconou AsJ dismissed the application, holding –

  1. There was a serious question to be tried that Christine was the beneficiary of a common intention constructive trust (she alleged as to 93% of the equitable title). This was supported by: her deposing to the required common intention or agreement; reference to an agreement in the Transfer (her Honour appears to state in the Transfer to Shannan of the subdivided block, but quaere this is a slip for the Transfer to Shannan from Christine); and Christine’s contribution to loan repayments.  Moreover, it appeared to be common ground that Christine contributed most of the purchase price of the parent title and that for many years she made payments into the mortgage loan account and resided on the property. [69], [71]
  2. There was a serious question to be tried that Christine was the beneficiary of a resulting trust (she alleged as to 65% of the equitable title) arising from her contributions to the purchase price of the parent title and to construction and fit-out.  Disputes about whether there was an agreement on the nature of Christine’s interest in the property, whether the presumption of advancement applied, and whether, as Shannan alleged, Christine was guilty of fraud, could only be resolved at trial. [69], [72], [75]
  3. The balance of convenience favoured maintenance of the caveat because of: Christine’s long residence; her age; evidence of her investing her life savings into the property; the fact that Shannan proposed to sell the property with vacant possession with only $20,000 from the net proceeds being distributed to Christine pending resolution of the dispute; Christine’s claim of a substantial interest in the property; and Christine’s inability to buy another property or rent one in Lorne. Any hardship for Shannan could be met by Christine’s undertaking to maintain mortgage and property expense payments, which would maintain the status quo of many years, and Christine being required within 7 days to commence a proceeding to establish her interest in the property. [76]-[78]
  4. There would be an order for amendment of the caveat to assert Christine’s claim to a 93% interest in the property. [80]

Philip H. Barton

Owen Dixon Chambers West

Tuesday, February 21, 2023