Blog 60. De facto partner v former wife – No constructive trust.

Seaborne v Lester & Anor [2022] VSC 52, Irving AsJ (17 February 2022)

The facts were –

  • Andrew Lester (Lester) and the first defendant were divorced. In 2019 the Family Court made final property orders contemplating that he would pay her over $2 m.
  • Lester failed to comply with these orders and enforcement proceedings ensued resulting in consent orders in June 2020 including that: he would pay her $750,000 within 90 days and $313,000 within 90 days thereafter; and contemporaneously with the first payment she would transfer her interest in a Unit in Richmond to him and he would discharge the mortgage over it.
  • She alleged that when the parties were negotiating the June 2020 orders he informed her: that he proposed to obtain a loan to enable the first payment; and that just before agreement was reached he told her that he could not obtain a loan and that he intended to transfer the Unit to his de facto partner the plaintiff so that the plaintiff could obtain a loan on security of the Unit.
  • The first defendant also alleged that her consent to the June orders was induced by the plaintiff’s representation that if she so consented the plaintiff would on security of the Unit obtain a loan to be applied by Lester to satisfy the June orders.
  • Lester paid the first defendant the $750,000 required. The plaintiff deposed that Lester informed her that he had done this.  The first defendant transferred her interest in the Unit to Lester.
  • Subsequently, on 11 September 2020, the plaintiff purchased the Unit from Lester for approximately $980,000 and became registered proprietor.
  • In July 2021 the first defendant caveated over the Unit on the grounds of implied, resulting or constructive trust. The plaintiff applied for an order under the Transfer of Land Act s. 90(3) that the caveat be removed.
  • At the hearing the court permitted the caveator to rely on, but gave little weight to, her unsworn affidavit apparently asserting that: Lester transferred the Unit to the plaintiff to place it beyond the reach of his creditors including the caveator; Lester had an interest in the Unit pursuant to a trust by virtue of his de facto relationship with the plaintiff and of his significant contributions to the Unit; the Unit had been transferred to the plaintiff for an undervalue and so she held it or part thereof on trust for Lester; and in consenting to the June 2020 orders the first defendant relied on the plaintiff’s representation that the plaintiff would do everything she could to ‘get you everything you’re owed’.
  • It appeared that the first defendant claimed that Lester owed her $200,000.

Irving AsJ held –

  1. There was no serious question to be tried of the trust alleged. At its highest, the first defendant had asserted a debt of $200,000 owed by Lester under the 2020 orders.  The assertion that the plaintiff held an interest in the Unit on trust for Lester, inferred from the relationship between the plaintiff and Lester and the purchase price, was unsubstantiated.   Even assuming the plaintiff held an interest on trust for Lester this would not give the first defendant an interest in the Unit. [48]-[50], [53]
  2. There was no serious question to be tried that the first defendant had an interest in the Unit via a remedial constructive trust based on the first defendant’s (unsubstantiated) historical financial and non-financial contributions to the property, she having transferred her interest in the Unit to Lester on the payment of $750,000. [51], [53]
  3. The balance of convenience favoured removal of the caveat. The claim for $200,000 could be met by an award of damages, was modest when compared with the value of the Unit, and Lester was not the registered proprietor. [54]-[55]

Philip H. Barton

          Owen Dixon Chambers West

        Tuesday, October 18, 2022

Blog 46. Mere domestic relationship – No caveatable interest – Indemnity costs.

Burghley Pty Ltd v Soames & Anor [2021] VSC 236, McMillan J, 5 May 2021.

The facts were –

  • In 2016 the plaintiff became registered proprietor of a property at Red Hill.   The purchase price had been paid or lent by its sole director (Mr Cecil).  The plaintiff paid stamp duty and other expenses using funds borrowed from the first defendant (Ms Soames).
  • Mr Cecil and Ms Soames cohabited at the property, according to him from about 4 January 2017 to 29 November 2018, according to her from about 20 December 2016 to 24 December 2018.
  • On 11 June 2018 the loan by Ms Soames was repaid with interest.
  • On 8 November 2020 the plaintiff entered a contract of sale with settlement due on 8 February 2021.
  • On 17 November 2020 Ms Soames caused a caveat to be lodged over the property, naming the caveator as her then solicitor.  This caveat was withdrawn on 10 December. 
  • On 24 December Ms Soames issued a Federal Circuit Court (FCC) proceeding seeking relief including a declaration that she had been in a de facto relationship with Mr Cecil. 
  • On 14 January 2021 Ms Soames by her solicitors lodged a caveat claiming an implied, resulting or constructive trust.   On 25 January her solicitors stated as to the basis of the caveat that: Ms Soames instructed that a trust relationship existed between “her, your client and the vendor of the property”, the merits of which would be determined by the FCC; they believed the interest would be deemed to be a constructive trust; until the FCC determined this she legitimately sought to protect her interest in the property, and; she would lift the caveat to permit settlement of the sale if the plaintiff’s solicitors undertook to retain the proceeds in trust pending the FCC decision.  

The plaintiff applied under the Transfer of Land Act s. 90(3) for removal of the caveat.  The solicitor for Ms Soames filed an affidavit in which no basis for lodging the caveat was identified.  At the hearing Ms Soames offered to withdraw the caveat in return for $300,000 from the sale proceeds being held in trust pending determination of the FCC proceeding. 

McMillan J. held –

  1. Neither a mere relationship, nor the existence of the FCC proceeding, created a caveatable interest. [20]
  2. Claims by Ms Soames that a caveatable interest arose from the following alleged circumstances were rejected: her working for nominal wages in a restaurant owned by a company of which Mr Cecil was director or shareholder; her assisting in renovations, absent a joint endeavour in relation to purchase of the property; matters concerning companies and the loan.  The caveator accordingly had no arguable caveatable interest and the balance of convenience favoured the plaintiff. [23]-[29] 
  3. The caveat was lodged for a collateral advantage or to bring pressure on the plaintiff – a serious misuse of the caveat procedure for an ulterior or collateral purpose.  No proper attempt to articulate the basis of the caveat was given.  By inference the caveat was lodged as a bargaining chip in the FCC proceeding.   The caveator was ordered to pay indemnity costs. [21], [32]-[34]

Philip H. Barton

Owen Dixon Chambers West

Tuesday, July 6, 2021