Blog 103. Caveat survives complicated proceeding involving the Law of Contract, Trust and Misleading or Deceptive Conduct.

Glen v Sherwood & Ors [2026] VCC 668, Judge A. Ryan.

This case involves a caveat to only a minor degree. However it is a comprehensive survey of the legal principles engaged when, following representations alleged to the misleading or deceptive, money is contributed to a joint venture which breaks down.

The facts were –

In 2011 the first defendant (Sherwood), Woodland and Whittingham applied for a patent for a metal detection system. They assigned the patent to a company (Goldwing), of which they were directors. Patents were subsequently granted in countries including Australia.
A business venture of development and commercialization of this system, mineral exploration and processing of intellectual property was formed. In about 2014 a partner in Pricewaterhouse Coopers (PwC), Tierney, joined the venture.
In 2017 the third defendant Alluvial Mining Pty Ltd (Alluvial) was incorporated. Sherwood and Woodland were its co-directors and equal shareholders.
Subsequently, Sherwood’s acquaintance Doreian invested $135,000 into the venture.
In around early 2018 the plaintiff (Glen) was invited to invest in the venture in an amount to be determined by him. Sherwood asserted that Glen was also invited to be the lawyer for the business, but Glen denied this.
On 26 March 2018 Sherwood told Glen that he, Woodland, Tierney, Adams (another financial investor) and Doreian, were developing the venture, which was worth $25 m.; and that in return for any investment Glen would receive shares in the company conducting the venture commensurate with the amount of his investment and based on the agreed value of the company (the March representations).
On 28 March 2018 Alluvial obtained an exploration licence.
At meetings on 6 and 7 April 2018: according to Glen but denied by Sherwood, Sherwood said that Tierney, in his capacity as a partner at PwC, had valued the business at $25 m.; Glen made a file note noting this independent valuation but with a footnote “NB: Due Diligence – need to view at least a basic statement of valuation with summary of the reasons behind that type of value.” In fact, because he trusted Sherwood and Sherwood had said there was no written valuation, Glen did not view a valuation (nor had Tierney valued the business). He also did not ask Tierney about it and Tierney (having been told by Sherwood of the $25 m. valuation) never disavowed it.
Sherwood represented to Glen on or about April to June 2018, and in subsequent conversations including on 30 July 2018 and 4 October 2018, that as further investment in the business Doreian had agreed to invest the proceeds of an insurance claim due to her.
On 25 April 2018 Glen obtained a bank loan to invest in the venture.
On 1 May 2018 Glen emailed Sherwood and Woodland inter alia stating in substance that: he was willing to be involved in the group; he would take some equity, quantum as yet undecided; it was urgent to formalise a Heads of Agreement/Memorandum of Understanding setting out at least the basic tenets of the agreement between the group of six (Sherwood, Woodland, Doreian, Adams, Tierney and himself) the business structure proposed, a business plan, and its aims and objectives; and thereafter a formal Shareholders Agreement could be finalised incorporating these matters.
On 30 May 2018 Glen emailed Sherwood stating that he hoped to reduce to writing the relevant aspects of the “Strategic Business Plan” and joint venture arrangement, and providing a detailed checklist of issues on which Sherwood was to give instructions to finalise the joint venture.
The second defendant (Geotic) was registered on 27 July 2018. Its co-directors were Sherwood and Woodland and its sole shareholder was Alluvial.
On 3 August 2018 Glen transferred $50,000 to Alluvial, being the first of 9 transfers to it totalling $375,000.
On 6 August 2018 Sherwood and Woodland entered a contract on behalf of the venture to purchase a rural property (Property) for $293,000. Sherwood had earlier told Glen that it contained extensive gold resources which the venture would excavate.
On 5 October 2018 Glen at Sherwood’s request paid $293,000 to settle the purchase in the name of Geotic. Adams subsequently moved there, living as a manager rent free.
On 8 July 2019 Doreian signed an agreement acknowledging that she held two Victorian exploration licences on trust for Arum 79 Pty Ltd. Glen made a file note recording that Doreian was holding the licences on –

“behalf of the ‘group’ [and] that the ELs will perform part of the overall ‘assets’ of the group. That the group will manage the ELs [and] that Simone [Doreian] is the ‘caretaker’ of the ELs for the group”.

On 9 July 2019 the group of six signed a Memorandum of Understanding (MOU) dated 25 June 2019, drawn by Glen, setting out the “business structure and plan” and (in cl. 2.4(b)) obligations to be performed by Sherwood, Woodland and their respective corporate entities. Clause 2.4 included critical steps to be undertaken by Sherwood including incorporation of a holding company; finalization of a share sale agreement removing Whittingham; and the shares in all subsidiary companies being transferred to the holding company (in which Glen was to be issued shares).
On 3 September 2019 Glen obtained a bank loan, part being paid to Alluvial.
On 22 October Sherwood emailed other group members inter alia advising of discussions with another possible joint venturer, Rogers, on initial terms of a working position and share purchase within their group, to be legally documented, and that “the total group value position based on today’s agreement is in excess of one hundred million dollars.”
Glen gave evidence that Sherwood told him that Rogers was buying in at $1 m. for a 1% share, so valuing the new company at $100 m. Tierney agreed that, in the context of Rogers investing, a higher valuation of $100 m. was discussed. Sherwood’s evidence was that the uplift in value of $75 m. is “not straightforward, it’s not just Bob [Rogers], it’s the whole thing that goes together”.
On 27 December 2019 Sherwood emailed Glen and Tierney that amounts received by 31 December 2019 would receive share allocation at the valuation of $25 m. but that subsequent amounts would be recorded against the new company value or returned.
On 30 December 2019 Glen made his 7^th payment to Alluvial, on, he said, the understanding that the “new company value” was $100 m. He made his last such payment on 6 January 2020. His investment totalled $688,000.
During 2022 Sherwood ceased to provide information or to account to Glen.
On 8 May 2023 two exploration licenses were granted to Doreian for the use and benefit of Sherwood, Geotic and Alluvial.
In July 2023 there was widespread group concern about lack of progress and of (particularly from Sherwood) information. Tierney gave evidence about Sherwood failing to complete accounting records which were a necessary precursor to incorporation of a new holding company. A letter of demand to Sherwood from Doreian’s solicitors on 4 August seeking a refund of her investment and notifying her withdrawal from the venture was met on 18 August with dispute from Sherwood’s solicitors accompanied by an offer of $135,000 by Rogers to Doreian for transfer to him of the exploration licences granted on 8 May.
In August 2023 Glen caveated over the Property, claiming an interest pursuant to an implied, resulting or constructive trust, decided to leave the venture and commenced this proceeding.
Tierney subsequently withdrew from the venture.
On 20 November 2023 a deed of settlement was executed between Doreian, Sherwood, Woodland, Goldwing, Alluvial, Alluvial Enterprises (a subsidiary of Alluvial) and Geotic. The terms of the deed with Doreian included that: the business relationship between Doreian, Sherwood and Woodland and the companies had irretrievably broken down (Recital F); Sherwood would arrange repayment of $135,000 to Doreian (paragraph 1) and on receipt Doreian would transfer her exploration licences to Rogers; and Doreian’s interest in the business would be transferred to a third party nominee.
Glen did not become aware of the deed of settlement with Doreian until after issue of this proceeding. Sherwood did not tell him that Doreian’s investment had been repaid with funds provided by Rogers or that exploration licences held by her on trust for the joint venture were transferred to Rogers.

Glen sued Sherwood, Geotic and Alluvial Mining. Geotic counterclaimed for removal of the caveat.

Section 18(1) of the Australian Consumer Law (ACL) provided that:

“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

Sections 4(1) and s4(2) of the ACL were deeming provisions to the effect that a representation as to a future matter was taken to be misleading under s. 18 if the representor did not have reasonable grounds for making it.

Judge Ryan held –

Contract.

Any alleged oral agreement between the parties did not amount to an immediately binding contract, for the following reasons –

- The discussions lacked clarity, were flexible, and critical matters were omitted. A reasonable business person in the position of the parties would consider that these were simply conversations concerning Glen’s possible investment and future steps. The requisite contractual intention was lacking because the essential terms of the alleged contract were uncertain and incomplete, including the precise terms and obligations of any other party and their identities,
- Post-contractual conduct may be relied upon to determine the existence of an oral contract. However, the conduct relied upon by the plaintiff, being first the objective in the MOU cl. 1 to “reflect the verbal agreements and discussions that have been occurring between the parties prior to the formalisation of this written agreement”, and second being an email dated 13 August 2019 from Sherwood to Glen saying “…. just making the formal funding call as per the shareholder agreement”, could not be construed as an acknowledgment by the defendants of the existence of an earlier binding oral agreement in the terms pleaded;
- the parties’ subjective intentions were inadmissible as an aid to construction.

[8], [81]-[90]

Discussion by Judge Ryan of the criteria for formation of a contract. [76] – [80]

The MOU did not create an immediately binding agreement. It fell within the third category of Masters v Cameron (1954) 91 CLR 353 namely:

“Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three cases. … Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract” because –

1. the following text of the MOU led to a construction that it was not intended to be immediately binding:
  1. the heading being “Memorandum of Understanding (Business Structure and Plan)”;
  2. Recital cl. 6 stated that the parties “are desirous of joining together” etc (indicative of an intention to take future steps as opposed to a presently concluded agreement) and “developing and progressing a range of business projects” and developing “Potentially further yet unidentified subsidiary businesses” (both of which lacked completion and certainty and fitted with the document’s description as a business plan);
  3. Clause 1 dealt with the “Objects of the Business Structure and Business Plan”, a primary objective being to “set out in a very broad and preliminary way a business plan description” and sub-paragraph (e) provided to “set out broadly” etc. Such wording suggested merely a business plan;
  4. Clause 3.13(b) referred to any further purchase of shares in the ultimate holding company at a value to be determined in accordance with the provisions of a document not yet drawn for a company not yet in existence;
  5. Clause 7 referred to proposed projects noting that the business “proposes to enter into specific projects”, ie a future intention or plan;
  6. Clause 8 stated that the “in principle” arrangements referred to herein were to be provided for in a formal shareholder’s agreement: the term “in principle” carried some weight, particularly absent any other wording in the MOU suggesting it was immediately legally binding;
2. the context in which the parties were operating. A reasonable business person would have understood that the parties wished to record the state of their negotiations and set out a business plan detailing future steps to implement the joint venture, particularly where an earlier joint venture between the inventors of the patent was unresolved and subject to finalising a proposed share sale agreement.

[8], [106]-[110]

Discussion by Judge Ryan of the construction of contracts. [92]-[97]

If the MOU had been a binding agreement her Honour would have found that its terms included cl. 2.4 and an implied term that each party would undertake all steps necessary to give effect to its provisions within a reasonable time. [113], [116]

If the MOU had been a binding agreement her Honour would have found that Sherwood breached cl. 2.4 because he either abandoned it or failed to undertake all necessary steps to progress the joint venture in a timely fashion. However, her Honour would not have found that he misused any sums from the Alluvial account, or that there was a breach related to Glen’s access to Alluvial’s bank account, and accordingly any terms related to this would not have been breached. [120]-[124]

Reliance damages were damages for wasted expenses incurred in anticipation of, and reliance on, the performance to a contract by another party. It was, however, insufficient that the plaintiff spent money in anticipation of, or reliance on, performance of a defendant’s contractual obligation; and that money was wasted or partly wasted after taking account of any benefit obtained by the plaintiff from the expenditure. It must also be shown that the money was wasted because of the breach of contract. In other words, the plaintiff would have recovered the money if that obligation had not been breached. [134]

Where the breach had resulted in (namely, caused or increased) uncertainty about the position of the plaintiff if the contract had been performed, then the discharge of the plaintiff’s legal burden of proof was facilitated by assuming (or inferring) in the plaintiff’s favour that, had the contract been performed, then the plaintiff would have recovered the expenditure reasonably incurred in anticipation of, or reliance on, the performance of the contract. The strength of this assumption or inference, and thus the weight of the burden placed on the party in breach to adduce evidence to rebut the inference in whole or in part, depended on the extent of the uncertainty resulting from the breach. [129], [135]-[136]

Assuming the defendants were in breach, there was uncertainty about the position of the plaintiff had the breach not occurred, ie because the business was not yet developed and commercialized its value and profitability remained highly speculative, and this gave rise to the facilitation principle. Applying that principle, the court should assume or infer that had the contract been performed Glen would have recovered the expenditure reasonably incurred in anticipation of its performance. Thus there was an increased burden on the defendants to adduce evidence to rebut the inference. They had not done so. Accordingly, if the MOU was a binding agreement breached by Sherwood her Honour would have found that Glen was entitled to reliance damages of $821,650.65, being the sum of $668,000 paid to the defendants and $153,650.65 paid by him in interest to borrow the sum paid to the defendants. [127], [138], [139], [140

Joint endeavour constructive trust.

The elements of a joint endeavour constructive trust were:

- a joint relationship or endeavour, in which expenditure was shared for the common benefit in the course of and for the purposes of which an asset is acquired; and
- the substratum of that joint relationship or endeavour had been removed or the joint endeavour prematurely terminated without attributable blame; and
- it would be unconscionable for the benefit of those monetary and non-monetary contributions to be retained by the other party to the joint venture.

[147]

Discussion by Judge Ryan of the law related to joint endeavour constructive trusts. [146]-[156]

There was a joint endeavour between the parties as regards the purchase of the Property. In reliance on the joint venture Glen paid the purchase price and invested a total of $688,000. As he had yet to receive any return on his investment he acted to his detriment in doing so. [158], [162], 163]

Three of the original six joint venturers (ie Doreian, Tierney and Glen) having left, the proposed joint venture outlined in the MOU between the six named participants had collapsed. No attributable blame causing the breakdown could be sheeted home to Glen. His decision to withdraw from the project was blameless having regard to the fact that by the time he decided to leave Tierney and Doreian had already left, and he had yet to receive any equity share or return on his investment. There was no hard evidence that the project was effectively underway and it was unlikely to be commercialised in the near future. [173], [175], [176]

Accordingly the defendants had not made good on the expectation they encouraged. [179]-[180]
It would be unconscionable for Geotic to retain the beneficial interest in the Property because –
1. Glen contributed the purchase price of the Property;
2. no other joint venturer contributed financially (Doreian did contribute $135,000 but had been repaid);
3. a payment by Adams recorded in the MOU long predated the formation of the joint venture;
4. of a dearth of evidence about the work of other joint venture parties and so it was difficult to assess their contributions;
5. the defendants retained the remaining assets of the joint venture;
6. retention by Geotic of its beneficial interest in the Property without having to account to Glen for his contribution towards the price, would give it an unintended and unconscionable windfall.

[189], [191], [192]

Having regard to the serious nature of conferring proprietary interests in persons other than the legal owner a constructive trust would not be imposed over property if other equitable remedies existed capable of doing full justice. [195]

A constructive trust in favour of Glen over the Property would not be the appropriate remedy, because an order for restitution of his payment to Geotic would suffice to assuage Geotic’s conscience in equity. Orders imposing a constructive trust and transferring the Property would also entail the difficulty of non – parties being affected by them, including the joint venturers Adams (also residing there) and Woodland, and Rogers who said he had acquired exploration licences from Doreian and may also have purchased her interest in the joint venture. Proprietary orders would reduce the asset pool otherwise available to the remaining joint venture parties, who had a right to heard on this as a matter of procedural fairness, and for that reason alone a constructive trust would not be imposed and a transfer not be ordered. [197]-[199]

An additional reason for not imposing a constructive trust over the sum of $375,000 paid by Glen to Alluvial was that it had been expended, was no longer identifiable and Glen had not provided a schedule of traceable proceeds. Equity would not impose a constructive trust over dissipated or untraceable funds. [201]-[202]

Accordingly on the joint endeavour trust claim Glen was entitled to restitution of the sums he invested by way of equitable compensation because:

1. he paid the sum of $688,000 as contributions towards the joint venture;
2. the consideration for his investment had wholly failed;
3. the joint venture had broken down prematurely with no attributable blame on his part;
4. there were no applicable contractual provisions dealing with the treatment of the parties’ contributions in this event;
5. it would be unconscionable for the defendants to retain the benefit of Glen’s contributions because this could not have been intended in these circumstances.

[8], [174], [197], [199], [200], [203], [204]

No resulting trust.

The presumption of a resulting trust arose where A advanced money used to purchase property held in the name of B. The law presumed that A intended to maintain a beneficial interest over that property. This presumption could not, however, prevail over the actual intention of that party as established by the overall evidence. [206], [207], [209]

Glen’s payment of $293,000 used to purchase the Property attracted the presumption of resulting trust. However the presumption was rebutted by the fact that this contribution was made by Glen on the understanding that the Property was to be acquired for the benefit of the joint venture as a whole and not for him personally. It was a part of Glen’s overall investment. [208]-[211]

Were the payments of $375,000: subject to a trust; or loans; or (other than pursuant to a joint endeavour constructive trust) did they attract the remedy of equitable compensation or damages?

The payments of $375,000 were not advanced by Glen pursuant to a trust in his favour. They were invested for the benefit of the joint venture as a whole as opposed to for Glen personally, ie invested for business purposes, not as funds to be held separately or returned. Further, it was impossible to create a trust where the subject moneys had been expended, in this case in the course of developing of the business venture. [212]

Nor were the funds loans. [212]

Nor was Glen entitled (other than pursuant to a joint endeavour constructive trust) to an order for damages or equitable compensation in the sum of $375,000, being in effect reimbursement of the moneys he paid to Alluvial which were applied towards expenses incurred by the joint venture. [213], [214]

Misleading or deceptive conduct.

The four steps in determining whether s. 18 of the ACL was breached were –

1. Identifying with precision the conduct said to contravene s 18(1).
2. Whether it was in trade or commerce.
3. Considering what meaning the conduct conveyed to its intended audience; and whether, if the pleaded conduct was said to amount to a representation, it was established by the evidence.
4. Whether the conduct, in light of the meaning it conveyed, was misleading or deceptive or likely to mislead or deceive, ie whether it had the tendency to lead into error. Whether conduct was misleading or deceptive was a question of fact to be determined objectively by a consideration of the impugned conduct in the circumstances in which it occurred.

The third and fourth steps required the court to characterise, as an objective matter, the conduct viewed as a whole and its notional effects, judged by reference to its context, on the state of mind of the relevant person or class of persons. That context included the immediate context being relevantly, all the words in the document or other communications and the manner in which those words are conveyed—not just a word or phrase in isolation—in the broader context of the relevant surrounding facts and circumstances.

[216]

Discussion by Judge Ryan of the law related to misleading or deceptive conduct under s. 18 of the ACL. [216]-[223]

By reason of ss. 4(1) and 4(2) of the ACL the representor (here Sherwood) was deemed not to have reasonable grounds unless evidence was adduced to the contrary. If such evidence was adduced the representee then had to prove that the grounds relied upon were not reasonable. The expression “reasonable grounds” meant that at the time the representation was made the representor had facts sufficient to induce, in the mind of a reasonable person, a basis for making the representation. This was assessed objectively not be reference to the maker’s subjective state of mind. [218]

In an action for damages under s. 236 of the ACL the plaintiff must establish that the contravening conduct caused that person’s loss, ie only that the contravention was a, not the sole, cause of the loss and damages sustained. The plaintiff must show reliance on the conduct. [219]

Discussion by Ryan J. of the concepts of causation and reliance. [220]-[223], [280], [286]

As to compensation –

- In most cases the appropriate measure of loss caused by misleading and deceptive conduct was the measure of loss for the tort of deceit.
- The existence of a compensable loss and quantum was ascertained by inquiring whether and by how much that person was worse off as a result of acting or refraining from acting on an inducement of false representations by the other person.
- The amount of damages may be reduced under s. 236 if the person claiming contributed to the loss or damage by failing to take reasonable care.

[219], [221], [223]

The March representations were genuine representations as to the then state of affairs and not misleading or deceptive given the circumstances in which they were made. [227], [274]

The representation by Sherwood to Glen on or around 6 April 2018 that Tierney had valued the business at $25 m. was untrue and thereby Sherwood engaged in misleading or deceptive conduct. It was made during the course of commercial negotiations relating to the investment and structure of the proposed joint venture business and so in trade or commerce. Glen relied on this representation: he made the decision to invest in the joint venture business in part because of this representation. His negligence, if any, did not sever the causal link. [247], [248], [275], [276], [279], [281], [293], [294]

The representation by Sherwood to Glen concerning Doreian agreeing to invest the proceeds of an insurance claim due to her was about a future matter, being her potential intention to invest when she received the proceeds. However, Sherwood did have reasonable grounds for making this representation and accordingly this conduct was not misleading or deceptive. [254], [273]

The representation by Sherwood that Rogers had agreed to invest $1 m. in the business, and so the business would be worth $100 m., was untrue and so misleading or deceptive as he did not agree to invest in the business at all. Glen relied on this representation in investing further moneys, being keen to take up shares at the prior valuation of $25 m. [278], [282], [293]

The representations by Sherwood or around 27 December 2019 as to investment before 31 December 2019 attracting shares at a proportion compared with a valuation of $25 m., and subsequent investment attracting shares at a proportion compared with a valuation of $100 m. were made during the course of commercial negotiations relating to the investment and structure of the proposed joint venture business and so in trade or commerce. Glen relied on them in deciding to invest. His negligence, if any, did not sever the causal link. [266]-[267], [279], [293], [294]

Where money was paid as a consequence of misleading conduct, the loss so suffered included not only that money but also the cost of borrowing it or the loss from its investment. Judgment would accordingly be entered against Sherwood for damages of $688,000 for misleading or deceptive conduct. [8], [295]

Caveat

Glen had a proper basis for lodging the caveat to protect his equitable interest in the Property. [8], [296], [297]

Philip H. Barton

Owen Dixon Chambers West

Thursday, October 22, 2026

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 –

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]
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]
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]
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]

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 –

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]
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]
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]
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]
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]
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]

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 71. Caveat based on alleged Baumgartner constructive trust fails.

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

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

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

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

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

38. Removal of caveats by courts exercising Family Law jurisdiction

Comment.

To non – Family Lawyers, including me, one approaches the topic of this Blog as approaching a rumoured mystery. However on examination the jurisdiction of the Family Court and Federal Circuit Court to remove a caveat is considerable. As the cases below show the jurisdiction is exercisable not only where one party to a marriage caveats over the other’s property, but also where one party to a marriage caveats over the property of someone joined as a party to a proceeding (typically a second respondent), and even over non – party caveators with notice of it who had not intervened, the Registrar of Titles also not being a party. This removal under the TLA s. 90(3) of a caveat lodged by a non-party is unique to Family Law.

Examples of courts exercising Family Law jurisdiction ordering removal of caveats appear to date at least from Bowe & Bateman [2012] FamCA 392 where the court issued a mandatory injunction requiring removal of a caveat. Then in Auricchio & Auricchio and Ors (No. 2) [2014] FamCA 240 Forrest J. followed Bowe but also held that the court could have ordered removal of a caveat under the Queensland equivalent of the TLA s. 90(3).

This Blog deals with recent Victorian cases of removal of the following caveats –

Green & Walls [2019] FamCA 76 – caveat by Husband thwarting performance of Family Court order.

Tailor & Tailor [2019] FamCA 383 – caveat by Wife over property owned by Husband from before marriage. Also a reminder of the basic proposition that an application under s. 79 of the Family Law Act for alteration of property interests was not a caveatable interest – see also Hermiz v Yousif [2019] VSC 160 (Blog 22).

Siebel & Siebel & Anor [2019] FCCA 3367 – caveat by Husband over property owned by second respondent (son).

Skye & Saidel and Anor [2020] FamCA 18 – caveats by non-parties over land owned by the second respondent who was the Wife’s mother.

Green & Walls [2019] FamCA 76, (22 February 2019), Cronin J.

· In 2014 the Husband lodged a caveat over property claiming an interest on the basis of an “implied, resulting or constructive trust”.

· Final property orders were made in 2016 in which the Wife was required to “discharge and refinance” the mortgage over that property, thereby releasing the Husband from the mortgage, and so she would be sole registered proprietor. Contemporaneously with the refinance the Husband was required to withdraw the caveat. If she could not obtain this release she was required to sell the property. There was no order indicating that the parties held any property upon trust for the purposes of the completion of their obligations under the orders.

· Because the Husband did not comply with a particular payment order the Wife was forced to put the property on the market, requiring removal of the caveat.

Cronin J directed the Registrar of Titles to remove the caveat. Because the orders of the Family Court were still executory it was still seized of the matter and had power to direct the removal of the caveat arising from its accrued jurisdiction [14]-[15]. More particularly –

(a) The claim for removal came within the “scope of the controversy” which is “identifiable independent of the proceedings… brought for its determination”. The scope was not limited to matters “incidental” to that which attracted federal jurisdiction in the first place but was here incidental to the completion of the obligations under the 2016 orders; [22]

(b) What was required to be identified was whether or not the claim which might otherwise appear to be outside of the Family Court’s usual jurisdiction was essential for the determination of the federal claim. Here, the federal claim was determined in 2016 but the efficacy of the order as an exercise of the power of the Commonwealth depended upon the caveat issue being determined; [23]

(c) The court had power either as a court of competent jurisdiction (within the definition in s. 4 of the Transfer of Land Act) or as part of its determination of the federal claim. The use of the State law was essential, or an integral element of the controversy between the husband and the wife about the alteration of property interests. Accordingly the exercise of power in s. 90 was within the jurisdiction of the court. [24], [26]

Tailor & Tailor [2019] FamCA 383, (2 July 2019), McEvoy J.

· In February 2019 the Wife caveated over property which the Husband had owned from long before the marriage.

· In May 2019 she filed an Initiating Application seeking final orders for the adjustment of property interests. A few days later he filed an Application seeking orders including that the Wife forthwith remove the caveat. This order was made upon the Husband’s undertaking not to sell, dispose of, or encumber the property without notice. His Honour held –

1. An application pursuant to s. 79 of the Family Law Act for alteration of property interests was not a caveatable interest.

2. Applying Auricchio & Auricchio and Ors (No. 2), if a party had lodged a caveat on a property the subject of litigation in the Family Court, an application for the removal of that caveat was properly to be regarded as arising out of a common substratum of facts and formed part of a single justiciable controversy. It accordingly fell within the jurisdiction of that court which could require the party to remove the caveat by the issue of a mandatory injunction in these terms pursuant to the Family Law Act s 114.

Siebel & Siebel & Anor [2019] FCCA 3367, (21 November 2019), Judge Blake

· The Applicant Husband advanced a sum to his son towards purchase of a property. The son became registered proprietor.

· In 2017 the Husband lodged a caveat on the basis of an implied, resulting or constructive trust. In 2018 he applied under s. 79 of the Family Law Act for a just and equitable division of property of the marriage. As the Applicant asserted that the property should be transferred to him and the Wife and then be available for distribution between them as part of the asset pool of the marriage his son was joined as second respondent.

· The Federal Circuit Court held that the advance of money was an unconditional gift and so that no trust existed, but that even if there had been evidence of a resulting trust the presumption of advancement applied in favour of the son. Accordingly the property was not part of the asset pool.

· His Honour also ordered that the Husband withdraw the caveat failing which the Registrar of Titles was directed pursuant to s. 90(3) of the Transfer of Land Act to remove the caveat. His Honour followed the reasoning of Cronin J. in Green & Walls:
the substance of the dispute before the Court concerned the ownership of the property and the efficacy of the orders made as an exercise of the Commonwealth power depended upon the caveat issue being determined.

Skye & Saidel and Anor [2020] FamCA 18, (17 January 2020), Macmillan J.

· In 2011 the second respondent, who was the mother of the Wife, provided the moneys for purchase of a property of which they and the Husband became joint registered proprietors.

· In 2014 D Pty Ltd lodged a caveat over the property on the basis of a Credit Account Application and guarantee for the supply of materials for a business, which was signed by the Husband in his capacity as a director – the Husband had agreed to charge his interest in any real estate in which he had a beneficial interest.

· In 2018 a second caveat was lodged by the liquidator of that company on the basis of an equitable mortgage given by the Husband over his interest in the property in settlement of proceedings by the liquidator against the company and the Husband.

· In 2018 the Wife filed an Initiating Application against the Husband seeking orders for property settlement. The orders eventually sought included an order that she and the Husband transfer their interests in the property to her mother who was formally joined as second respondent. In an Amended Response the second respondent sought a declaration pursuant to s. 78 of the Family Law Act as to the legal and beneficial ownership of the property and consequential orders. The Wife sought a similar declaration.

MacMillan J was satisfied that the caveators had been given notice of the proceedings, were aware of the orders sought and had elected not to intervene in the proceedings.

Her Honour held –

1. Although the second respondent was not a party to the marriage, where there was a single justiciable controversy the Family Court could exercise its accrued jurisdiction to make the orders the second named respondent sought: the Court could not determine the proceedings pursuant to s. 79 of the Family Law Act without first determining the husband and wife’s legal and equitable interests in the land. Also s. 78 provided a proper judicial basis for the making of a declaration binding the parties to this proceeding so long as the proceedings in which the declaration was to be made was, as in this case, a matrimonial cause. [25].

2. As the Husband and Wife held their interest in the land on a resulting trust or on a Muschinski v Dodds constructive trust for the mother the declaration sought would be made. [27]-[31]

3. If the Husband had an interest in the land he could charge or mortgage it without notice to the other registered proprietors. However, as the Husband did not hold his interest in the property beneficially he had no interest to mortgage or charge which could sustain the caveats. [42], [45]

2. Exercising the court’s power arising under the accrued jurisdiction the Registrar of Titles would be directed under the Transfer of Land Act s. 90(3) to remove the caveats. [53], [54], [56]

Philip H. Barton

Owen Dixon Chambers West

2 June 2020

37. Caveat claiming resulting implied or constructive trust removed – No prima facie case – Difference between “prima facie case” and “serious question to be tried” tests – Circumstances in which hearsay admissible on application under TLA s. 90(3).

SMAV Nominees Pty Ltd v Bakal Enterprises Pty Ltd [2020] VSC 203 (24 April 2020), Derham AsJ

Comment. This case is interesting for the following reasons –

1. It considers the circumstances in which hearsay is admissible on an application to remove a caveat under the Transfer of Land Act s. 90(3). See also Blog 11.

2. Derham AsJ considers whether the caveator has to show, as to the existence of its asserted legal or equitable rights in the land, on the one hand a prima facie case or on the other hand a serious question to be tried. His Honour states that the first is the correct test (as previously stated in Blog 1) and indeed states (at [64]) that the first test requires a higher standard than the second, citing the decision of Warren CJ in Piroshenko v Grojsman [2010] VSC 240; (2010) 27 VR 489. It is, however, difficult to find any case in which a court holds that a caveator met one and not the other test (in this case Derham AsJ finds that caveator failed both), and indeed in Concrete Mining Structures Pty Ltd v Cellcrete Australia Pty Ltd [2015] FCA 888 at [33] (not a caveat case) Edelman J stated that the difference between the two tests is one of language not of substance.

3. Although his Honour simply ordered that the caveator pay the plaintiff’s costs of the application he reserved liberty to apply in relation to his proposed orders. It was ominous that he also found that the caveat had been used as a bargaining chip as this may foreshadow indemnity costs – see Blog 35 and previous Blogs on costs.

The facts were –

· In October and November 2017 the plaintiff’s sole director Mavroudis loaned Sabawi a total of $200,000.

· In April 2018 Mavroudis was introduced to 294 Pound Road Hampton Park (“the property”) by Sabawi, whom he believed to be a licensed real estate agent. On 13 April he signed a “Letter of Offer Expression of Interest” and paid a holding deposit of $10,000 to one of the vendors at the direction of Sabawi.

· On or about 17 April 2018 Sabawi asked Mavroudis for his bank account details so that he could repay the loan of $200,000. Mavroudis did this. Sabawi subsequently advised Mavroudis that he had repaid the $200,000 to his account. Mavroudis received the $200,000 into his account on 18 April 2018, recorded in his bank statement as “Inward Telegraphic Transfer 180490”.

· On 7 July 2018 Sabawi presented the contract of sale to Mavroudis for signing with the purchaser named as “294 Pound Road Pty Ltd” and the vendor’s estate agent named as a particular company formed by the two of them other than for the purpose of selling real estate. Mavroudis signed only after insisting that the document be altered to show the plaintiff as purchaser and the sale as being by private treaty. The plaintiff became registered proprietor.

· On 23 August 2019, the solicitors for the plaintiff and Mavroudis received a letter of demand from the then solicitors for the first defendant (“Bakal Enterprises”) demanding repayment of $200,000. Among other things the letter alleged that, following discussion with an unnamed mutual friend, Bakal Enterprises had paid $200,000 into Mavroudis’s account on 18 April 2018 as a contribution towards a development on the property, which had fallen over. Shortly before this letter Mavroudis received a telephone call to similar effect from, he gathered, Bakal, who was Bakal Enterprises’ sole director.

· On 27 August 2019 the plaintiff’s solicitors responded, stating that Mavroudis’ first knowledge of these allegations was in this telephone call and refuting them. On 16 September 2019 the then solicitors for Bakal Enterprises responded confirming that the mutual friend was Sabawi, enclosing a receipt so as to corroborate the statement that Bakal Enterprises and not Sabawi had made the $200,000 payment, and demanding its repayment.

· The plaintiff heard nothing further until receiving notice that Bakal Enterprises through its new solicitors Madgwicks had caveated on 10 February 2020 claiming a freehold interest in the property on the basis of a resulting implied or constructive trust.

· The plaintiff’s solicitors demanded removal of the caveat and stated that the $200,000 had been repayment of a loan by Sabawi. On 27 and 28 February Madgwicks and the plaintiff’s solicitors communicated, in the course of which:

· Madgwicks stated that Sabawi denied the loan, maintaining that the caveator had an interest in the land arising from the contribution of $200,000 towards its purchase;

· the plaintiff’s solicitors provided documentary evidence of the $200,000 loan to Sabawi, foreshadowed caveat removal proceedings, reiterated Mavroudis’ previous account of the facts, and stated that: the plaintiff had purchased the property with its own funds and financial assistance from Mavroudis’s father; a planning permit for a subdivision of the property was imminent; the plaintiff had a very interested buyer once it could sell with plans and permits but that this was impeded by the caveat.

· On or about 5 March Bakal and Sabawi conferred with Madgwicks. On 12 March Madgwicks wrote to the plaintiff’s solicitors stating, after reiterating its instructions about the $200,000 payment, that Sabawi had instructed it that Mavroudis inappropriately altered the name of the purchaser in the contract of sale from 294 Pound Road Pty Ltd (to be incorporated between Mavroudis and Sabawi) to the plaintiff’s name and “[we] are informed by Mr Sabawi that this change was made under false pretences and without adequate payment to Mr Sabawi, who was instrumental in facilitating the sale in the first place …. Mr Sabawi is currently attending to swearing a statutory declaration confirming the above…”.

The plaintiff applied under s. 90(3) of the Transfer of Land Act for removal of the caveat. Before the caveator filed any evidence Madgwicks offered in return for withdrawal of the caveat that $300,000 be held in trust pending determination of the dispute.

The material before the court included –

· an affidavit by the caveator’s solicitor which stated that a statutory declaration was being prepared by Sabawi;

· an affidavit by Bakal. This affidavit exhibited a statutory declaration, inferred by his Honour to have been prepared by Madgwicks, said to have been made by Sabawi, containing Sabawi’s evidence including disputing Mavroudis’ account of the facts. Bakal asserted that Sabawi had not sworn an affidavit because of the social distancing measures required in the COVID-19 pandemic. The statutory declaration omitted reference to the false pretences allegation contained in Madgwicks’ letter of 12 March. It included that: in March 2018 Sabawi told Mavroudis that he was getting a friend to pay the deposit for the purchase; that after the $200,000 payment, Mavroudis acknowledged to Sabawi that the plaintiff had received the money; and he informed Mavroudis at the time of payment that the money was sent to him from Bakal for the purposes of the purchase.

· Bakal’s affidavit contained a rendition of financial and property dealings between Sabawi and Bakal , with repetition of statements allegedly made by Sabawi about Mavroudis. Bakal deposed –

· that he did not know Mavroudis personally and other than the transfer of the $200,000 he had not had any relationship or dealings with him or his entities;

· (partly denied by Mavroudis) as to an alleged involvement in this transfer of $200,000, garnished with further complex dealings. He deposed that: on or about 18 April 2018, he transferred $200,000 to the plaintiff by electronic fund transfer, without contact between the plaintiff (or Mavroudis) and Bakal Enterprises (or Bakal); the details of who and when to pay were provided by Sabawi to him. The reference on the payment produced by Bakal was “Deposit Pound Road”.

· affidavits by Mavroudis in which he deposed that when he signed the contract of sale he did not know, or know of, the caveator or anyone associated with it, and that he had not entered into any agreement, either personally or through any agent, with the caveator or any other party in relation to the property. Mavroudis deposed that there was no truth in the account in the statutory declaration.

The plaintiff submitted that the statutory declaration was inefficacious for non- compliance with the Oaths and Affirmations Act 2018 in its execution and witnessing.

Derham AsJ held –

1. Sabawi could have sworn an affidavit deposing to the matters in his statutory declaration. The inconsistencies between the statutory declaration and matters raised in correspondence, in particular in the Madgwicks letter of 12 March, were relevant to an assessment of the strength of the caveator’s claim. [27]-[28]

2. However, regardless of the efficacy of that statutory declaration under the Oaths and Affirmations Act, the material in it was admissible because –

(a) Under r. 43.03(2) of the Supreme Court (General Civil Procedure) Rules 2015, on an interlocutory application an affidavit may contain a statement of fact based on information and belief if the grounds were set out. This included the identification of the supplier of the information, ie its source. Nonetheless, the Court had a discretion to admit an affidavit non-compliant in this regard;

(b) Section 75 of the Evidence Act 2008 provided that in an interlocutory proceeding the hearsay rule did not apply to evidence if the party who adduced it also adduced evidence of its source. The source must be identified by name;

(c) If Bakal’s affidavit had related the material in the statutory declaration as what he had been told by Sabawi it would have been admissible, this application being interlocutory and the source being disclosed. [51]-[56]

3. His Honour set out the law on caveats in conventional terms, which, as this law is set out in Blog 1, it is unnecessary to repeat except in one regard. His Honour noted that: the caveator bore the onus of establishing a prima facie case to be tried, ie a probability on the evidence that the caveator will be found to have the asserted legal or equitable rights or interest in the land, not that it was more probable than not that at trial it (his Honour states “the plaintiff” but this appears to be a slip) would succeed; and that probability is sufficient to justify the practical effect which the caveat has on the ability of the registered proprietor to deal with the property in accordance with their normal proprietary rights;

this test was often used interchangeably with whether the caveator established a serious question to be tried, but the prima facie case test was to be preferred;

the “prima facie case” test required a higher standard that the “serious question to be tried” test. [30]-[33], [64]

4. Where two people provided the purchase money for a property jointly, but the property was put into the name of one of them only, the property was, in the absence of a relationship giving rise to a presumption of advancement, presumed to be held on resulting trust in favour of the unregistered party in proportion to their contribution. [57]

5. The caveator had not established a prima facie case or even, if it had been applicable, satisfied the serious question to be tried test, because Mavroudis gave evidence that he believed the payment of $200,000 was repayment of a debt and the evidence to the contrary was at best contained in Sabawi’s statutory declaration, which was of little weight, ambiguous and contrived. Insofar as it purported to ascribe knowledge to Mavroudis of the purpose of the payment, it did not support a resulting trust claim: there was no identification of the supposed beneficiary of the trust beyond “a friend” and the ambiguous statement that the money was sent to the plaintiff by Bakal for the purpose of purchasing the property. That might indicate that the beneficiary was to be Sabawi or Bakal. The only objective evidence supporting the caveator’s claim was the payment of $200,000 itself and the record that Bakal produced that it related to “Pound Road”. However, there was no evidentiary link between the payment of $200,000 and the payment of the deposit nearly three months later. [58]-[65], [76]

6. For the same reasons there was also no prima facie case of a Muschinski v Dodds constructive trust. There was no evidence of consensus between the caveator and the registered proprietor which could give rise to a joint endeavour. [66]-[69]

7. There was no suggestion that the existence of a claim for restitution gave rise to any equitable interest in the property. [70], [76]

8. The caveat had been used as a bargaining chip to obtain payment of $200,000. Although there were many cases in which a caveat dispute was resolved as proposed by the caveator’s solicitors, with the addition of a mechanism for the resolution of the dispute sometimes involving the caveator commencing a proceeding, the registered proprietor was entitled to deal with its property as it saw fit without being restrained by the injunctive effect of the caveat unless the caveator established a proper basis for the caveat. [73]-[76]

9. The caveator was ordered to pay the plaintiff’s costs of the application. His Honour however reserved liberty to apply in relation to his proposed orders. [77]

Philip H. Barton

Owen Dixon Chambers West

26 May 2020

36. Arguable case of constructive trust but caveat removed on balance of convenience due to conflict with pre-existing orders of Family Court – Undertaking as to damages should have been offered – Harvey v Emery & Ors [2020] VSC 153 (2 April 2020), John Dixon J.

Comment. This case is a good example of an arguable, but not strongly so, interest in the land being trumped by the balance of convenience – John Dixon J. engages in a careful balancing exercise against the background of existing Family Court orders. Several further general principles emerge –

1. Non-parties to a marriage claiming an interest in land the subject of Family Court proceedings should expeditiously intervene in those proceedings.

2. An undertaking as to damages is not commonly required as the price of maintenance of a caveat. Boensch v Pascoe [2019] HCA 49 at [113] (Blog 29) explains how caveats differ from interlocutory injunctions in this respect. However, John Dixon J. states an exception, being that such an undertaking is invariably required when a caveat was not removed in circumstances where third party rights would be detrimentally affected.

3. The case illustrates that a registered proprietor taking the s. 89A procedure can subsequently take the s. 90(3) procedure.

In Harvey v Emery & Ors [2020] VSC 153 the facts were –

• The plaintiff was married to Daniel Emery who was the son of the defendants. In about early 2018 the plaintiff and Daniel entered a contract to acquire a property as their family home for $950,000. They agreed that it would be acquired solely in her name to protect it from his creditors. The price comprised: her contribution of $200,000; an advance by the defendants to her of $200,000; the balance by bank finance secured by first mortgage. The plaintiff became sole registered proprietor.

• As noted by the judge, it could only be determined at a subsequent trial whether this advance (and any subsequent claimed expenditure) by the defendants was: a loan, and whether to the plaintiff or Daniel or both, and for what purpose, or; an equity contribution in the context of a broader joint enterprise to which the defendants were parties, with the ultimate purpose of providing accommodation to the plaintiff, Daniel, their children and the defendants. Related to this, were the defendants either chargees or beneficiaries of a resulting or constructive trust?

• After settlement of the sale the plaintiff briefly resided at the property, vacating due to conflict in the relationship with Daniel that led to its breakdown. Daniel remained in possession of the property for a period before being placed in custody for undisclosed reasons.

• In proceedings between the plaintiff and Daniel the Family Court made consent orders in March 2019 including to the effect that –

• the plaintiff would transfer the title to the property to him on him refinancing the bank loan to discharge her mortgage and release her from the debt obligation, and on payment by him of $200,000 into her solicitors’ trust account;

• if Daniel was unable to refinance the property was to be sold with net proceeds broadly being disbursed in varying proportions between the plaintiff and Daniel after payment of costs and discharge of the mortgage;

• The parties held their respective interests in the property on trust, with Daniel having the sole right of occupancy and sole liability for mortgage payments and outgoings.

• Daniel was unable to refinance and so could not comply with this order, leading to further Family Court orders in October 2019 including –

• that plaintiff recover possession of the property to effect its sale, in accordance with the March orders, and Daniel was restrained from caveating or from encumbering the land;

• directions for the conduct of the sale and for the distribution of the proceeds. The direction in respect of the priority of distribution of the proceeds was in substance: (a) – (d) payment of the costs and expenses of sale and for discharge of the mortgage; (e) payment to the plaintiff in reduction of the amounts due to her pursuant to the March orders with interest; (f) payment of any remainder to Daniel in reduction of the amounts due to him pursuant to the March orders; a further order relating to the balance owing in respect of a truck and other minor orders.

• The defendants were not party to the Family Court proceedings and did not seek to intervene. The settlement of the Family Court proceedings assumed that the whole of the beneficial interest in the property was matrimonial property.

• In November 2019 the defendants caveated claiming a freehold estate absolutely prohibiting all dealings on the grounds of an implied, resulting or constructive trust.

• The plaintiff applied under s. 89A of the Transfer of Land Act for removal of the caveat. In response the defendants commenced a Supreme Court proceeding against her seeking a declaration that the property was held on trust for them as to an amount equivalent both to the above advance of $200,000 and to $120,000 expended on renovations (“the trust proceeding”).

The plaintiff applied pursuant to s. 90(3) to remove the caveat. Daniel was not a party to either proceeding although he appeared to be a necessary party to the trust proceeding. He apparently expressed a strong interest in retaining ownership of the property. The defendants alleged that after the plaintiff had vacated the property, but with her acquiescence, they invested labour and expended approximately $120,000 in renovations and improvements and to enhance its value, in furtherance of a joint endeavour to acquire and improve an extended family home. The plaintiff disputed this.

John Dixon J. held –

1. If the allegations in the trust proceeding were proved, the defendants’ beneficial interest ought to have been excluded from the matrimonial property available for division in the settlement reached between the plaintiff and Daniel. [15]

2. If the defendants’ contentions were correct, they had been adversely affected by the Family Court’s orders. They could enliven the Family Court proceedings, either by applying to intervene and seek a rehearing or by appeal. There was potential for conflict between the resolution of the trust proceeding and the execution of the orders of the Family Court. There were compelling reasons to cross-vest the trust proceeding to the Family Court to be dealt with in conjunction with a reopening of the property settlement orders. This application under s. 90(3) was not the appropriate forum for determination of issues between the parties. [25]-[27]

3. The defendants had demonstrated some probability that they may be found to have an equitable right or interest in the land as asserted in the caveat, ie a freehold estate in the land based on a joint endeavour giving rise to a constructive trust. And if the renovation expenditure was added the defendants’ percentage claim to the beneficial interest would correspondingly increase. However, although there was a serious question for trial of such a constructive trust the claim did not appear to be strong. It was more probable that the defendants would establish an equitable lien or charge limited to the initial $200,000 advanced, this not being the interest claimed in the caveat. [4], [13], [28], [31], [32], [43], [45]

4. A relationship existed between the strength of the case establishing a serious question to be tried and the extent to which the caveator must establish that the balance of convenience favoured maintenance of the caveat. Because the constructive trust claim was not strong the balance of convenience obligation fell more heavily on the caveators. There were significant negative practical consequences for the plaintiff if the caveat was maintained, being –

(a) Frustration of the sale ordered by the Family Court, in circumstances where none of the material facts affecting that order were, or since had been, placed before that court at the material time;

(b) The plaintiff would breach the contract of sale, affecting the purchaser’s rights in a manner with adverse consequences for the plaintiff, which could culminate in her reopening the Family Court proceedings to adjust the value of the pool of matrimonial assets underlying their resolution;

(c) Other than belatedly, the defendants had not offered any undertaking as to damages, notwithstanding that this undertaking was invariably required when a caveat was not removed in circumstances where third party rights would be detrimentally affected. Having regard to the belatedness of the offer it was not deserving of weight in the absence of evidence of its worth;

There was insufficient evidence that the plaintiff had sold at an undervalue, and if the property market was falling the sale should proceed. [5], [33], [39], [45]-[52]

5. The course that carried the lower risk of injustice, if it should turn out that his Honour was wrong, was to order that the caveat be removed on the following conditions –

a) amendment of the trust proceeding and it being transferred to the Family Court;

(b) relief of the plaintiff of the obligation to comply forthwith with the orders of the Family Court, and in lieu order that the proceeds of sale be distributed in accordance with paragraphs 7(a) – 7(f) of the order of October 2019 and that the balance remaining be deposited into an interest bearing account and not be disbursed save by further order of the Family Court. [53]-[59]

Philip H. Barton

Owen Dixon Chambers West

19 May 2020

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

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

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

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

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

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

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

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

The facts were –

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

Daly AsJ:

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

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

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

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

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

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

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

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

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

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

The chronology was –

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

Derham AsJ held:

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

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

The chronology was –

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

Derham AsJ held:

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

14. Caveats lodged over NSW land based on Muschinski v Dodds constructive trust – Under Real Property Act 1900 (NSW) s. 74K(2) caveat not to be extended unless caveator’s claim has or may have substance – claim without substance

D’Agostino v Zandata Pty Ltd and Ors [2018] VSC 115 (15 March 2018) McMillan J.

This case is novel for a Victorian court, being an application of NSW law, but the caveat would equally have been removed under Victorian law.

A man died survived by various family members including his de facto partner and the plaintiff who was her son. The deceased was a director of and held controlling interests in the three defendant companies. The plaintiff lodged caveats with the NSW Registrar-General over land owned by the companies, claiming an interest in each under a constructive trust. The Registrar-General served lapsing notices requiring the caveator to apply for order extending the caveats. He applied to the NSW Supreme Court for an order under s. 74K(2) of the Real Property Act 1900 (NSW) which provided that the court may, if satisfied that the caveator’s claim has or may have substance, extend the caveat. The proceeding was cross-vested to Victoria.

The caveator alleged that over a period of 38 years he acted to his detriment in reliance on the encouragement of the deceased by contributing to the acquisition, maintenance and/or improvement of the properties, and this encouraged an expectation that he and his mother would eventually own those properties.

McMillan J held –

1. The application was to be determined in accordance with the law of New South Wales. An application for the extension of the operation of a caveat was treated as analogous to an application for injunctive relief. Her Honour cited conventional authorities. [20], [22]

2. A constructive trust claim may form the basis for a caveatable interest in real property. The plaintiff relied on a trust of the type enunciated by the High Court in Muschinski v Dodds. There was however no sufficient prima facie case giving rise to a serious question to be tried that there was a constructive trust here. There was substance in the defendants’ submission that even at their highest the promises were not to the effect stated nor did the plaintiff rely on them as alleged. Further, the properties were owned by the companies and there was not allegation that the deceased made any representation as an officer or representative of the companies. [26], [27], [36]-[39]

3. The balance of convenience was also against extension of the caveats. There was no immediate risk of dissipation of the land. The injury caused to the plaintiff by non-extension did not outweigh the injury the defendants would suffer through extension. [48]

4. The lower risk of injustice was for the operation of the caveats not to be extended. [49]

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Comment.

This Blog deals with recent Victorian cases of removal of the following caveats –

Green & Walls [2019] FamCA 76 – caveat by Husband thwarting performance of Family Court order.

Siebel & Siebel & Anor [2019] FCCA 3367 – caveat by Husband over property owned by second respondent (son).

Skye & Saidel and Anor [2020] FamCA 18 – caveats by non-parties over land owned by the second respondent who was the Wife’s mother.

Green & Walls [2019] FamCA 76, (22 February 2019), Cronin J.

· In 2014 the Husband lodged a caveat over property claiming an interest on the basis of an “implied, resulting or constructive trust”.

· Because the Husband did not comply with a particular payment order the Wife was forced to put the property on the market, requiring removal of the caveat.

Cronin J directed the Registrar of Titles to remove the caveat. Because the orders of the Family Court were still executory it was still seized of the matter and had power to direct the removal of the caveat arising from its accrued jurisdiction [14]-[15]. More particularly –

Tailor & Tailor [2019] FamCA 383, (2 July 2019), McEvoy J.

· In February 2019 the Wife caveated over property which the Husband had owned from long before the marriage.

1. An application pursuant to s. 79 of the Family Law Act for alteration of property interests was not a caveatable interest.

Siebel & Siebel & Anor [2019] FCCA 3367, (21 November 2019), Judge Blake

· The Applicant Husband advanced a sum to his son towards purchase of a property. The son became registered proprietor.

· The Federal Circuit Court held that the advance of money was an unconditional gift and so that no trust existed, but that even if there had been evidence of a resulting trust the presumption of advancement applied in favour of the son. Accordingly the property was not part of the asset pool.

· In 2011 the second respondent, who was the mother of the Wife, provided the moneys for purchase of a property of which they and the Husband became joint registered proprietors.

· In 2018 a second caveat was lodged by the liquidator of that company on the basis of an equitable mortgage given by the Husband over his interest in the property in settlement of proceedings by the liquidator against the company and the Husband.

MacMillan J was satisfied that the caveators had been given notice of the proceedings, were aware of the orders sought and had elected not to intervene in the proceedings.

Her Honour held –

2. As the Husband and Wife held their interest in the land on a resulting trust or on a Muschinski v Dodds constructive trust for the mother the declaration sought would be made. [27]-[31]

3. If the Husband had an interest in the land he could charge or mortgage it without notice to the other registered proprietors. However, as the Husband did not hold his interest in the property beneficially he had no interest to mortgage or charge which could sustain the caveats. [42], [45]

2. Exercising the court’s power arising under the accrued jurisdiction the Registrar of Titles would be directed under the Transfer of Land Act s. 90(3) to remove the caveats. [53], [54], [56]

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1. It considers the circumstances in which hearsay is admissible on an application to remove a caveat under the Transfer of Land Act s. 90(3). See also Blog 11.

The facts were –

· In October and November 2017 the plaintiff’s sole director Mavroudis loaned Sabawi a total of $200,000.

· The plaintiff heard nothing further until receiving notice that Bakal Enterprises through its new solicitors Madgwicks had caveated on 10 February 2020 claiming a freehold interest in the property on the basis of a resulting implied or constructive trust.

· The plaintiff’s solicitors demanded removal of the caveat and stated that the $200,000 had been repayment of a loan by Sabawi. On 27 and 28 February Madgwicks and the plaintiff’s solicitors communicated, in the course of which:

· Madgwicks stated that Sabawi denied the loan, maintaining that the caveator had an interest in the land arising from the contribution of $200,000 towards its purchase;

The plaintiff applied under s. 90(3) of the Transfer of Land Act for removal of the caveat. Before the caveator filed any evidence Madgwicks offered in return for withdrawal of the caveat that $300,000 be held in trust pending determination of the dispute.

The material before the court included –

· an affidavit by the caveator’s solicitor which stated that a statutory declaration was being prepared by Sabawi;

· Bakal’s affidavit contained a rendition of financial and property dealings between Sabawi and Bakal, with repetition of statements allegedly made by Sabawi about Mavroudis. Bakal deposed –

· that he did not know Mavroudis personally and other than the transfer of the $200,000 he had not had any relationship or dealings with him or his entities;

The plaintiff submitted that the statutory declaration was inefficacious for non- compliance with the Oaths and Affirmations Act 2018 in its execution and witnessing.

Derham AsJ held –

2. However, regardless of the efficacy of that statutory declaration under the Oaths and Affirmations Act, the material in it was admissible because –

(b) Section 75 of the Evidence Act 2008 provided that in an interlocutory proceeding the hearsay rule did not apply to evidence if the party who adduced it also adduced evidence of its source. The source must be identified by name;

(c) If Bakal’s affidavit had related the material in the statutory declaration as what he had been told by Sabawi it would have been admissible, this application being interlocutory and the source being disclosed. [51]-[56]

this test was often used interchangeably with whether the caveator established a serious question to be tried, but the prima facie case test was to be preferred;

the “prima facie case” test required a higher standard that the “serious question to be tried” test. [30]-[33], [64]

6. For the same reasons there was also no prima facie case of a Muschinski v Dodds constructive trust. There was no evidence of consensus between the caveator and the registered proprietor which could give rise to a joint endeavour. [66]-[69]

7. There was no suggestion that the existence of a claim for restitution gave rise to any equitable interest in the property. [70], [76]

9. The caveator was ordered to pay the plaintiff’s costs of the application. His Honour however reserved liberty to apply in relation to his proposed orders. [77]

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

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

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

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

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

Derham AsJ held:

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· Bakal’s affidavit contained a rendition of financial and property dealings between Sabawi and Bakal , with repetition of statements allegedly made by Sabawi about Mavroudis. Bakal deposed –