Bisognin v Hera Project Pty Ltd
[2017] VSC 783
•15 December 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S CI 2017 04336
| GINO ANDREW BISOGNIN | First Plaintiff |
| LEAH JOAN BISOGNIN | Second Plaintiff |
| v | |
| HERA PROJECT PTY LTD (ACN 163 685 041) | First Defendant |
| REGISTRAR OF TITLES | Second Defendant |
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JUDGE: | Daly AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 11 December 2017 |
DATE OF RULING: | 15 December 2017 |
CASE MAY BE CITED AS: | Bisognin & Anor v Hera Project Pty Ltd & Anor |
MEDIUM NEUTRAL CITATION: | [2017] VSC 783 |
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CAVEATS - Application for removal of caveat – Caveat lodged pursuant to claim of estate in fee simple over whole of land prior to subdivision - Sale of portion of land - Whether any caveatable interest maintained over portion of land not subject to contract of sale following subdivision - Whether caveat has effect of securing performance of obligations under contract of sale extending beyond transfer of legal interest in land - Serious question to be tried not established – No equitable interest in land outside scope of contract of sale following subdivision - Order for removal of caveat made - Costs reserved - Transfer of Land Act (1958) s 90(3) - Lintel Pty Ltd v Nixon [1991] 1 VR 287, 291, applied
CONSTRUCTIVE TRUST - Plaintiffs contractually obliged to undertake works required by third parties on property - Payment of bonds by first defendant to third parties - Whether payments to third parties for purpose of securing performance of contractual obligations for benefit of a property give rise to a resulting or constructive trust in respect of that property – No resulting or constructive trust
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr W G Stark with Mr A Fronis | Ace Solicitors |
| For the First Defendant | Mr N Pane QC | Russell Kennedy Pty Ltd |
HER HONOUR:
This proceeding, being an application by the plaintiffs to remove a caveat lodged by the first defendant over the title to the plaintiffs’ property at 1A Adrian Street, Cranbourne East (‘caveat’), was commenced on 27 October 2017. The plaintiffs were vendors of a part of their land pursuant to a contract of sale dated 13 March 2015 (‘contract of sale’). The first defendant purchased the southern portion of the plaintiffs’ land (‘southern lot’) and the plaintiffs retained the northern portion of the land (‘northern lot’). The contract of sale referred to a then unregistered plan of subdivision, which was subsequently registered on 15 September 2017 (‘plan of subdivision’). Settlement of the sale of the southern lot (now on a separate title as of 15 September 2017) to the first defendant was completed on 2 October 2017.
The caveat was lodged on 3 June 2016, whereby the first defendant claimed an estate in fee simple over the whole of the plaintiffs’ land as ‘purchaser under a contract of sale dated 13 March 2015 with the registered proprietors of the [l]and as the vendor’. There was no dispute that the first defendant was entitled to lodge the caveat at that time. Upon registration of the plan of subdivision, the caveat remained registered on both lots. The plaintiffs contended that it should only have been registered on the title to the southern lot, being the property that the first defendant purchased pursuant to the contract of sale, and would, in any event, lapse once the first defendant became the registered proprietor of the southern lot.
The plaintiffs and the first defendant have been embroiled in substantial litigation in this Court for a number of years concerning the obligations of both parties under the contract of sale.[1] The parties are currently awaiting the determination of an appeal against orders made by Riordan J on 22 May 2016 in S CI 2016 03487. If the plaintiffs are successful in the appeal, they have made it clear that it will seek to recover the southern lot from the first defendant.
[1]See the decisions of the Trial Division in Bisognin v Hera Projects Pty Ltd [2015] VSC 647, per Cameron J; Bisognin and Anor v Hera Project Pty Ltd [2016] VSC 75, per Sloss J; Hera Project Pty Ltd v Bisognin [2016] VSC 591, per Macaulay J; and the trial of the proceeding in Hera Project Pty Ltd v Bisognin & Anor in S CI 2016 03457 [2017] VSC 268 per Riordan J. See also the decision of the Court of Appeal in Bisognin v Hera Project Pty Ltd [2016] VSCA 322, Bisognin v Hera Project [2017] VSCA 7, and Bisognin v Hera Project [2017] VSCA 195. Judgment is currently reserved following the appeal from the decision of Riordan J on 22 May 2017 (see [2017] VSC 268]).
The plaintiffs’ application was supported by an affidavit of the plaintiffs’ former solicitor, Mr Terrence Grundy, who deposed to the contract of sale and its terms, the lodgement of the caveat, the registration of the plan of subdivision on 15 September 2017 and the settlement of the sale of the southern lot. Mr Grundy also deposed to the correspondence between the solicitors for the parties after the plaintiffs made a demand that the caveat be removed.
The first defendant filed extensive affidavits regarding the dealings between the parties, including the various pieces of litigation underway. The position of the first defendant concerning the validity of its position that it was entitled to maintain the caveat, notwithstanding the settlement of the sale of the southern lot on 2 October 2017, is set out in a letter from its solicitors, Russell Kennedy Lawyers, to the then solicitors for the plaintiffs on 11 October 2017. An extract from this letter follows.
As conceded in your Letter, our client was entitled to and has a proper basis for lodging the Caveat over the Vendors’ property (being all of the land in Certificate of Title Volume 8876 Folio 892) as a result of the 2015 contract of sale (‘Contract’).
Following extensive litigation between our client and the Vendors, in December 2016 the Court of Appeal in Bisognin v Hera Project Pty Ltd [2016] VSCA 322 determined that Special Condition 2 of the Contract required our client to pay fees (on the Vendors’ behalf) to the water authorities, South East Water and Melbourne Water (the ‘Bonds’), pursuant to agreements with those water authorities and as required by the planning permit with respect to each lot on Plan of Subdivision 735801Q.
While the Court of Appeal in [the] above case made a determination in relation to the financial obligations to the water authorities (including payment of the Bonds), it did not overturn the decision below of her Honour Justice Sloss with respect to the non‑financial obligations under the Contract, including the obligation on the Vendors to undertake works for water supply and sewerage facilities, in accordance with agreements with South East Water and Melbourne Water (‘Works’).
The Vendors have the ongoing benefit of the Bonds and the substantial increase in the value of Lot 1, in circumstances where they remain obliged to undertake the Works pursuant to the Contract. Your clients’ inaction with respect to the Works falls well short of the best endeavours obligations imposed on your clients under the Contract and the orders of the Court.
While the registration of the plan of subdivision has now occurred, the Contract remains executory, as your clients are obliged to perform the Works.
Until your clients’ obligations under the Contract have been completely performed, our client has rights arising from the Contract that continue to enure and are not extinguished by the registration of the plan of subdivision. For your client to assert otherwise is unjust in circumstances where your clients have failed to undertake the Works.
We are instructed that the caveat will remain on the title until the Works are completed by the Vendors. Your references to Pearl Lingerie are readily distinguishable and simply do not apply in this instance.
The first defendant filed and served extensive written submissions in support of the maintenance of the caveat, in summary, as follows:
(a) the caveat was lodged to secure the performance by the plaintiffs of their obligations under the contract of sale, a number of which remain outstanding, stating:
the caveat remains appropriately in force until all of [the contract of sale] has been performed, not just that part of it which required the transfer of the title of [the southern lot] to Hera.
(b) given the plaintiffs’ contention that, in the event that the decision of Riordan J is reversed on appeal the transfer of the southern lot could be reversed, the first defendant is entitled to protect its interest as purchaser until resolution of the question of whether the plaintiffs would, consequent upon a successful appeal, have the right to terminate the contract of sale; and
(c) the first defendant has made payments of substantial bonds to Melbourne Water and South East Water (‘water authorities’) to secure the plaintiffs’ obligations to carry out the works required by the water authorities. By refusing to undertake these works, the plaintiffs have taken the benefit of the bonds paid by the first defendant. Alternatively, if they do undertake the works, and the bonds are refunded to them, the plaintiffs have an obligation to repay the bonds to the first defendant. Such an obligation gives rise to a lien, being a proprietary interest in the land, or alternatively, gives rise to a resulting or constructive trust in favour of the first defendant.
During the hearing of the application, senior counsel for the first defendant referred to and relied upon a number of documents exhibited to the affidavits affirmed by the solicitor for the first defendant, Mr David Kazatsky, in opposition to the application, being:
(a) the planning permit issued by the City of Casey on 11 June 2015 permitting the subdivision, which specified, among other things:
The owner of the land must enter into agreements with the relevant authorities for the provision of water supply, drainage, sewerage facilities, electricity and gas services to each lot shown on the endorsed plan in accordance with the authority’s requirements and relevant legislation at the time.
(b) the agreement between the water authorities and the plaintiffs concerning the works to be carried out on the plaintiffs’ land;
(c) a draft notice of assignment directing the water authorities to repay the bonds to the first defendant, which the plaintiffs have refused to execute;
(d) correspondence between the parties in the latter part of 2017 regarding various matters; and
(e) a copy of a Growth Areas Infrastructure Contribution (‘GAIC’) certificate issued by the State Revenue Office which stated that ‘The GAIC that would be imposed if a GAIC event were to occur in respect of the land this financial year is $120,047.02’.
The plaintiffs contend that there is no serious question to be tried as to whether the first defendant has any interest in the northern lot which would give rise to a caveatable interest on the part of the first defendant. Counsel for the plaintiffs submitted that once settlement of the southern lot took place, the first defendant had no right to maintain the caveat over the title to the northern lot. Rather, the first defendant is in effect seeking to use the plaintiffs’ property as security for obligations under the contract of sale which, even if they were not in dispute, would not give rise to a proprietary interest in the northern lot which would permit the lodgement of a caveat. Accordingly, as there is no serious question to be tried as to whether the first defendant has the interest claimed in the caveat, the question of the balance of convenience does not arise. While counsel for the plaintiffs conceded that there was no evidence of any pressing urgency about the matter, he noted that the presence of the caveat inhibits the ability of the plaintiffs to deal with their land.
Counsel for the plaintiffs relied upon the decision of Nathan J in Lintel Pines Pty Ltd v Nixon and Anor,[2] in which he held that a purchaser of a property anticipated to be subdivided was entitled to lodge a caveat to protect its interests over the whole of the land prior to subdivision, and upon the land it purchased after subdivision. Nathan J stated as follows:
I come now to the second and novel issue of whether the defendants’ caveat over the whole of Lot 83 enured to the portion in respect of which they had an interest, when the allotment was further subdivided in January of 1990. I understand that upon the registration of the two new titles dealing with Lot 83 the defendants did withdraw their caveat over the title relating to the part of Lot 83 in which they had no interest. However, I am satisfied that their caveatable interest enured to the portion of the subdivision which sustained their interest. So much accords with the theory of the Torrens system and its practice. To hold that a caveat is extinguished upon subdivision would amount to removing caveats or extinguishing equitable and legal interests by a method not contained in the Transfer of Land Act. If a caveat or the interest supporting it could be extinguished merely by subdividing the land, it could defeat the protection given by a caveat.
I have already noted the purpose of a caveat, to have efficacy it must enure to that portion of subdivided land over which an interest is claimed, despite the number or minuteness of subsequent subdivisions. Therefore the defendants had and continue to have the right to maintain the caveat limited now to Certificate of Title Volume 9927 Folio 844. It is a separate issue whether I should exercise my discretion in favour of the plaintiffs and discharge the caveat pursuant to s 90 of the Act.
[2][1991] 1 VR 287, 291.
While his Honour was considering a slightly different issue than the issues in the current application, counsel for the plaintiffs submitted that the above statement (being the only authority on the point) supports the proposition that, first, a purchaser of a portion of land to be subdivided is entitled to lodge a caveat over the whole of the land prior to subdivision, but after subdivision is only entitled to maintain a caveat over that part of the land which is the subject of the contract of sale.
There was no dispute between the parties as to the principles governing applications for the removal of caveats. As noted by counsel for the plaintiffs in his written submissions, these principles were conveniently summarised by Elliott J in Sylina v Solanki,[3] as follows:
(1) The Court’s power under s 90(3) of the Act is discretionary.
(2)A caveator bears the onus of establishing that there is a serious question to be tried that it does have the ‘estate or interest in land’ as claimed.
(3)If the caveator establishes a serious question to be tried in relation to the estate or interest claimed, the caveator must further establish that the balance of convenience favours the maintenance of the caveat until trial.
(4)There is a relationship between the strength of the case in establishing a serious question to be tried and the extent to which the caveator must establish the balance of convenience favours the caveator; the stronger the case in establishing a serious question, the more readily the balance of convenience might be satisfied. It is sufficient that the caveator show a sufficient likelihood of success that, in the circumstances, justifies the practical effect which the caveat will have on the ability of the registered proprietor to deal with the property in question in accordance with its normal proprietary rights.
[3][2014] VSC 2, [43].
Counsel for the plaintiffs also referred to the well-known statement of Warren CJ in Piroshenko v Grojsman and ors,[4] as follows:
Therefore, consistently, in order for a caveator to satisfy the first limb of the test applied by the courts when deciding applications under s 90(3) of the Act, he or she must satisfy the court that:
1.there is a probability on the evidence before the court that he or she will be found to have the asserted equitable rights or interest; and
2.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 question in accordance with their normal proprietary rights.
[4][2010] 27 VR 489, 493, approved by the Court of Appeal in Carbon Black Lab Pty Ltd v Launer [2015] VSCA 126.
In my view, the first defendant has not discharged the onus it bears to establish that there is a serious question to be tried with regard to whether it holds the ‘estate or interest in the land’ claimed in the caveat. I agree with the submissions of counsel for the plaintiffs that, once the land was subdivided, any equitable interest conferred upon the first defendant with respect to the northern lot fell away, as it was not the subject of the contract of sale. This proposition is consistent with the decision of Nathan J in Lintel Pty Ltd v Nixon.[5] Further, the extant obligations of the plaintiffs under the contract of sale do not rise far enough to confer the interest claimed in the caveat in respect of the northern lot once the plan of subdivision was registered. I accept that the plaintiffs may well have actual or contingent liabilities to the first defendant under the contract of sale, and I accept that the first defendants have doubts about the plaintiffs’ willingness and/or capacity to meet those obligations, unsurprisingly, given the history of litigation between the parties. However, it was open to the parties to agree for further security for the performance of those obligations to be conferred by the terms of the contract of sale, for example, by way of a charge, but no such term is contained in the contract of sale.
[5][1991] 1 VR 287, 291.
Given my finding that the plaintiffs’ extant obligations under the contract of sale do not confer an interest in the northern lot upon the first defendant capable of supporting a caveat, it is not necessary for the purposes of this application to deal with the first defendant’s detailed submissions in support of their contentions that the caveat ought not to be removed, and the plaintiffs’ response. The first defendant’s submissions largely concern whether or not the plaintiffs have performed their obligations under the contract of sale, and whether the plaintiffs have incurred actual or contingent liabilities in the course of their dealings with the first defendant. Those disputes will no doubt be ventilated on another day in a different forum. However, I will briefly deal with the first defendant’s main contentions, as summarised in paragraph 6 above.
First, at the risk of repetition, the statement that ‘the caveat remains in force until all of the [contract of sale] has been performed’ is simply wrong. A caveat does not secure the performance of contractual obligations: in the absence of an express agreement to the contrary, a caveat can only secure the interest in land claimed in the caveat, in the current case, the equitable interest of a purchaser under a contract of sale.
Secondly, the contention that the first defendant is entitled to protect its interests as purchaser in the event that the decision of Riordan J is reversed on appeal is misconceived. The position of the first defendant is not protected by the caveat over the northern lot, except to the extent it amounts to a ‘bargaining chip’: the first defendant’s position is protected by the fact that it is the registered proprietor of the southern lot, and will remain so pending the outcome of the appeal.
The appeal concerns whether the purchasers were entitled to terminate the contract of sale, and whether the first defendant was entitled to specific performance of the contract of sale. Riordan J found for the first defendant on both issues, and an application by the plaintiffs for a stay was unsuccessful. If the appeal is unsuccessful, the status quo will remain, in that the defendant will continue to be the registered proprietor of the southern lot, and the parties will no doubt move on to deal with their outstanding disputes under the contract of sale. If the appeal is successful, it is difficult to see how any caveat over the northern lot can protect the first defendant’s ‘interests’: the plaintiffs will be entitled to recover the southern lot, presumably subject to a range of conditions to protect the interests of the first defendant. The nature of those conditions will no doubt be the subject of submissions before the Court of Appeal. It is difficult to see how the presence of the caveat over the northern lot enhances or protects the first defendant’s position in those circumstances.
As for the consequences of the first defendant’s payment of the bonds to the water authorities on behalf of the plaintiffs, I repeat again my statement that the caveat secures an interest in land, not the performance of contractual obligations. There was no significant argument on the question of whether the plaintiffs’ contingent liability to repay the bonds to the first defendant automatically creates a lien. That may well be the case. However, the authorities make it clear that, upon an application to remove a caveat, a caveator must persuade the Court that there is a serious question to be tried that they have the estate or interest claimed in the caveat: that a caveator may have some other recognised proprietary interest in the relevant land is insufficient to defend the caveat. In the current case, the first defendant’s interest was an equitable interest pursuant to a contract of sale, not an interest pursuant to a lien.
For completeness, I do not consider that the authorities relied upon by the first defendant in its submissions assist the first defendant to any great extent. Ex parte Lord[6] is certainly authority for the proposition that a purchaser under a contract of sale has a lien over the property concerned to secure the moneys paid by way of deposit in the event that the contract comes to an end, and that such an equitable lien is a proprietary interest capable of being protected by a caveat. However, in the current case, the contract of sale, insofar as it transferred title in the southern lot to the first defendant, is complete. There are no longer any deposit monies to protect. I doubt that this decision can be relied upon as authority for the proposition that a purchaser under a contract of sale is entitled to a lien over another property simply because the first defendant has paid money in connection with the contract of sale over and above the purchase price. Once again, the caveat does not claim an interest pursuant to a lien.
[6](1985) 2 Qd R 198, 201-202, see also Rose v Watson (1864) 10 HLC 672.
Having reviewed the other authorities relied upon by the first defendant to support the proposition that the caveat secures all of the obligations of the plaintiffs under the contract of sale, being Re Cosslett (Contractors) Ltd,[7] and Schmidt v 28 Myola Street Pty Ltd (‘Schmidt’),[8] I cannot derive from my review of these authorities support for such a proposition, and my attention was not directed to how I might do so. In Re Cosslett (Contractors) Ltd, the interest in certain chattels on the land in question arose out of the express terms of a contract: there the issue was, as a matter of construction, whether the contract created a charge over the chattels, and the nature of the charge (ie, either fixed or floating). Schmidt is authority for the proposition that ‘an equitable interest in land is capable of supporting a caveat even where that interest will not compel the registered proprietor to deliver a registrable instrument’. It does not support the proposition that a vendor’s obligations under a contract of sale over and above the obligation to transfer the legal interest upon payment of the purchase price can amount to an equitable interest in a property.
[7](1998) Ch 495.
[8](2006) 14 VR 447, 451.
As for the question of whether the payments made by the first defendant to the water authorities for bonds to secure the plaintiffs’ obligations to the water authorities creates a resulting or constructive trust over the northern lot in favour of the first defendant, this submission was only faintly pressed by senior counsel for the defendant, and properly so. I repeat my observations concerning the claimed lien concerning the need for the interest claimed to be the interest claimed in the caveat in question, but add further that it is difficult to see, on the authorities, how moneys paid to a third party, even for the improvement or benefit of the northern lot, could give rise to a resulting trust. It might well be that payments of that nature might give rise to a constructive trust, having regard to the decisions of the High Court in Muschinski v Dodds,[9] and Baumgartner v Baumgartner.[10] But this submission was not developed, and those cases are very different to the current case. It is difficult to see how a court would recognise a constructive trust in circumstances where the rights and obligations of the parties are regulated by the contract of sale.
[9](1985) 160 CLR 583.
[10](1987) 164 CLR 137.
Further, while it is not strictly necessary for me to do so, I agree that the first defendant’s submission that the status quo ought to be preserved pending the decision of the Court of Appeal is misconceived. If the caveat is not maintainable at law, the fact that the parties are in dispute concerning the same or similar subject matter does not alter the position.
Accordingly, I will order that the caveat be removed. I note that the question of costs, the basis upon which any costs are payable, and by whom any costs should be paid awaits further argument.
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