Booth v Young
[2019] WASC 88
•22 FEBRUARY 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: BOOTH -v- YOUNG [2019] WASC 88
CORAM: TOTTLE J
HEARD: 22 FEBRUARY 2019
DELIVERED : 22 FEBRUARY 2019
FILE NO/S: CIV 2736 of 2018
BETWEEN: FRANK BOOTH
Plaintiff
AND
HEATHER YOUNG
First Defendant
THE REGISTRAR OF TITLES
Second Defendant
THE PUBLIC TRUSTEE FOR THE STATE OF WESTERN AUSTRALIA
Third Defendant
Catchwords:
Application for extension of caveat - Whether serious question to be tried - Whether balance of convenience favours extension of operation of caveat - Turns on own facts
Legislation:
Transfer of Land Act 1893 (WA) s 138C
Result:
Application unsuccessful
Caveat removed, orders made preserving net proceeds of sale of property
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr R Guerrini |
| First Defendant | : | Mr D Avery |
| Second Defendant | : | No appearance |
| Third Defendant | : | Mr L Chiat |
Solicitors:
| Plaintiff | : | Lawley Legal |
| First Defendant | : | Avery & Ashoorian Lawyers |
| Second Defendant | : | No appearance |
| Third Defendant | : | Public Trustee (WA) |
Case(s) referred to in decision(s):
Bashford v Bashford [2008] WASC 138
Bride v Registrar of Titles [2015] WASC 11
TOTTLE J:
(These reasons were delivered extemporaneously on 22 February 2019 and have been edited from the transcript).
Introduction
This is an application by the plaintiff for an order under s 138C of the Transfer of Land Act 1893 (WA) extending the operation of a caveat registered against the title of a residential property in the Perth suburb of Bicton. The first defendant is the registered proprietor of the property. She is the only daughter of the plaintiff and the third defendant. The third defendant is under a disability and her interests are represented by her guardian ad litem, being the Public Trustee for the State of Western Australia.
The plaintiff relies upon affidavits sworn by him on 1 October 2018 and 19 February 2019. The first defendant relies upon an affidavit sworn by her on 15 February 2019. On behalf of the third defendant, the Public Trustee has filed a notice of intention to abide the outcome.
Factual background
The following account of the factual background is derived from the affidavit evidence to which I have referred.
In 1979, the first defendant and her then husband, Mr Frederick Young, purchased the property. In 1989, the plaintiff and the third defendant came to live with the first defendant and Mr Young at the property. The circumstances surrounding that event are controversial. It was agreed, however, that the plaintiff and the third defendant would pay for what is colloquially known as a 'granny flat' to be built in the garden and when it was completed it would become their home. The flat was built and it is not in dispute that the plaintiff and the third defendant paid for its construction.
The plaintiff and the third defendant lived in the flat until the second defendant, who is now 90 years of age, moved into residential care. The plaintiff still lives in the flat and he is 89 years of age. The evidence suggests, and it was common ground, that in 1997 a caveat was registered against the title of the property recording that the plaintiff and the third defendant held a one‑half interest in it. I will refer to the circumstances in which that caveat was lodged in more detail later in these reasons.
In about 1999, the first defendant and Mr Young divorced. The property was transferred into the first defendant's name on 14 June 2002. In about 2009, the first defendant mortgaged the property in favour of Westpac Bank to secure borrowings of $500,000. The borrowed funds were used to invest in a business operated by the first defendant's son and her daughter‑in‑law. The business failed, and the debt due to Westpac is presently $539,758.
The plaintiff's evidence is that he and the third defendant agreed to remove the caveat that had previously been registered against the title of the property to enable the mortgage to Westpac to be registered against it. In July 2018, the first defendant listed the property for sale. She says she had no option other than to list the property for sale as she was unable to make the mortgage repayments due to Westpac.
On 10 August 2018, the plaintiff lodged a caveat against the title of the property. He describes his interest as an equitable interest pursuant to a constructive trust between the registered proprietor as trustee and the caveator as beneficiary, and states the interest arose by virtue of expenditure of money for the improvement of the property. On 20 September 2018 at the request of the first defendant, the second defendant sent the plaintiff a notice under s 138B of the Transfer of Land Act which stated that the caveat would lapse on 12 October 2018 if he did not obtain an order extending its operation.
On 27 September 2018, the first defendant accepted an offer for the purchase of the property for $1,140,000. The offer and acceptance specified that settlement was to take place on 24 January 2019.
By an originating summons issued on 1 October 2018, the plaintiff sought an order extending the operation of the caveat. In his affidavit sworn on 1 October 2018, the plaintiff deposed that in the alternative to maintaining a caveat against the property, he sought an injunction that the proceeds of sale be held on trust pending the determination of the proceedings.
The plaintiff expressed concern that without such an injunction, his interests in the property would be ignored and the proceeds of sale dissipated by the first defendant. In the course of oral submissions, however, the plaintiff's counsel argued strongly that the caveat should be extended, thus preventing the sale from proceeding. His counsel emphasised that the property was the plaintiff's home.
On 5 October 2018, I made orders extending the operation of the caveat and referred the dispute to mediation.
On 6 December 2018, the first defendant agreed to purchase a property in Mandurah for the sum of $365,000 on the basis that the settlement of that acquisition would take place no later than 31 January 2019.
A mediation took place on 14 December 2018, but the parties were unable to resolve their differences.
The applicable principles
The principles applicable to an application such as this were summarised by Beech J (as his Honour then was) in Bashford v Bashford,[1] and more recently by Edelman J in Bride v Registrar of Titles.[2] Those are the principles that I apply to the determination of this application and there is no need to restate them.
[1] Bashford v Bashford [2008] WASC 138.
[2] Bride v Registrar of Titles [2015] WASC 11.
Essentially, there are two questions for determination.
(a)First, has the plaintiff demonstrated that his claim has or may have substance, or as it is sometimes put, has he established that there is a serious question to be tried in respect of the estate or interest in the land claimed by him?
(b)Second, does the balance of convenience favour the extension of the operation of the caveat?
The two questions are interrelated. The court must balance the injustice that might be suffered by the first defendant if the application to extend the caveat is granted and the plaintiff later fails at trial, against the injustice that might be suffered by the plaintiff if the application is not granted and he later succeeds in establishing his interest in the property.
The plaintiff's interest in the land
The first defendant accepts that the plaintiff and the third defendant have an interest in the property. It is unnecessary to spend any time analysing how that interest has arisen.
It is the extent of the interest that is in dispute. In that respect, I return to the plaintiff's evidence. In support of his argument that he and the third defendant have an interest extending to an unencumbered one‑half interest in the property, the plaintiff relies upon documents he says were produced to him in 1997 by Mr Young as documents prepared by Mr Young's solicitors. The plaintiff says that before the documents were prepared, Mr Young had told him and the third defendant that he - that is, Mr Young - was going to approach a lawyer to have their half interest in the land recognised in a formal way. The relevant documents were as follows:
(a)A draft caveat in the approved form, completed with the title details of the property, nominating the plaintiff and the third defendant as caveators claiming an equitable interest pursuant to a constructive trust. That interest was claimed on the basis of the caveators having expended moneys for the improvement of the property as referred to in a statutory declaration made by the plaintiff and the third defendant on 12 April 1997.
(b)A statutory declaration made by the plaintiff and the third defendant on 12 April 1997 was the second of the documents relied upon by the plaintiff. Paragraphs 1 to 5 of the statutory declaration are as follows:
1.During the year 1989 we agreed with Frederick Arthur Young and Heather Jane Young ('the Youngs') to pay for additions to the Youngs' dwelling at [the property].
2.The additions were to be used for our accommodation.
3.We obtained all the necessary approvals from the City of Melville council and the additions were completed shortly thereafter.
4.It was agreed between ourselves and the Youngs that we would become joint owners with the Youngs, namely that the Youngs would be entitled to the ownership of the land as to one half as joint tenants and we would become the owners of the second half of the said land as joint tenants, as tenants in common in equal shares.
5.We now claim an undivided one half share in the land.
(c)A further statutory declaration was made on 13 August 1997, in which the plaintiff and third defendant referred to the earlier statutory declaration of 12 April 1997 and declared:
2. Our estate and interest being claimed in the land in [the property] is an equitable interest pursuant to a constructive trust made between the registered proprietors as trustee and oursleves [sic] as beneficiaries.
(d)A transfer of land form bearing the date 4 October 1997, completed in relation to the property, which purported to record a transfer of title to the property by the first defendant and Mr Young to the plaintiff and third defendant. The transfer was expressed to be subject to an encumbrance identified as 'the Citibank mortgage'. The transfer form was signed by all parties.
The plaintiff says that these documents were signed by him and the third defendant at the request of Mr Young.
As to the transfer of land form, the plaintiff says that he and the third defendant were approached in October 1997 by Mr Young who explained that he wanted to have a half-share in the property transferred to them. He explained that only the half-share that he and the first defendant held would be subject to the Citibank mortgage. To this end, he asked the plaintiff and the third defendant to sign the transfer form to which I have referred. The plaintiff says that since signing the transfer form, he has become aware that the effect of the document is to transfer the entire interest in the property to the plaintiff and the first defendant, subject to the mortgage to Citibank. The plaintiff says that that was never his intention, nor the intention of the third defendant. The plaintiff says that the intention was that the Citibank mortgage would remain on that half of the property which was to be retained by the first defendant and Mr Young, and that the half‑share which the plaintiff claims belong to him and the third defendant was to be free of the mortgage. The plaintiff says that Mr Young said he would lodge the transfer at the Department of Land Administration, but subsequently said that he was not able to do this because Citibank would not produce a duplicate certificate of title to enable the registration to take place.
The first defendant's explanation for the caveat and transfer documents is that they were initiated by Mr Young to protect and safeguard the property from a claim made by the Australian Taxation Office in respect of income tax owed by Mr Young. She annexes to her affidavit a statement to that effect made by Mr Young.
The plaintiff also says that after 1989, he and his wife paid the mortgage instalments that were due in respect of the Citibank mortgage. These payments were $400 every four weeks. He said that he and the third defendant made these payments because the first defendant was unable to pay the mortgage payments as they fell due.
The balance of convenience
As referred to earlier, the third defendant is in a residential care home, and the plaintiff says that she has no funds and no funds are available to her for her care. The plaintiff says he does not want to live in rental accommodation. He wishes to live in Fremantle or the surrounding area to be close to his wife whom he visits twice a day. He says he has difficulty climbing stairs and wishes to move into ground‑floor accommodation. He has researched the property market in Fremantle and it appears from that research that he would require between $300,000 and $400,000 to purchase a ground‑floor unit in the Fremantle area.
The time for settlement of the sale of the property has been extended, however, the first defendant expresses concern that if the caveat remains on the title of the property, settlement may not take place and the buyer will sue her for damages. She is also concerned that if she does not settle the purchase of the property she has agreed to buy, she will be sued by the vendor of that property. The defendant says that she is unable to pay the instalments that are required to avoid the mortgage to Westpac going into default.
The first defendant's preferred position (and the position contended for by her in her affidavit) is that the property be sold, and following the deduction of the selling costs and the amount required to discharge the mortgage to Westpac, an amount of $20,000 be paid to her and $20,000 be paid to the plaintiff for relocation costs. The funds required to complete the purchase of the Mandurah property - that is, $379,680 - be released to her settlement agent, and the balance be paid to the Public Trustee to be held in an interest‑bearing account until further order of the court.
By my calculations, the balance that would be held in trust in accordance with those arrangements proposed by the first defendant would be $134,000, approximately 12% of the value of the property if the sale price is accepted to be a reliable indicator of value.
In the course of oral submissions made in support of the proposition that the caveat should be extended the plaintiff's counsel said that the plaintiff has friends who are prepared to discharge the debt to Westpac and to obtain an assignment of the mortgage if the mortgage were to go into default.
Analysis and disposition
Self‑evidently, this is a very unfortunate dispute. The difficulties faced by the parties are a consequence of the decisions made by the first defendant to accept an offer to purchase the property before resolving the issue of her parents' interest in it. Such difficulties are further complicated by the first defendant's decision to contract to purchase a further property knowing that she might not have the funds required to effect settlement. The first defendant's decisions have created a situation in which third parties have been entangled in a family dispute.
My assessment is that the plaintiff's claim that he and the third defendant have a 50% interest in the property is a relatively strong one. As I have noted, the defendant accepts that her parents have some interest in the property, but she has not said what she considers the extent of that interest to be.
The statutory declaration and the caveat documents prepared by Mr Young's solicitors on his instructions in April 1997 provide support for the plaintiff's claim. In the light of the first defendant's evidence to the effect that those documents and the later transfer form were prepared in order to mislead the Australian Taxation Office, I regard the first defendant's evidence with some caution, including her explanation of why those documents were prepared.
The plaintiff's claim is also supported by the contents of a declaration by Mr Young which was annexed to the first defendant's affidavit. In that declaration, Mr Young refers to a decision made by him and the defendant to give the plaintiffs part of the rear garden so that they could build a granny flat on it. This statement provides further support for the plaintiff's claim.
The plaintiff's counsel has emphasised that the property is the plaintiff's home, and has stressed the plaintiff's age and his expectation that he would be able to live at the property for the rest of his life. The plaintiff's counsel has stressed that the plaintiff's interest arose before that of the purchaser with whom the first defendant has contracted to sell the property.
In my assessment, the first defendant's inability to service the debt to Westpac means that a sale of the property is inevitable. In making this observation, I do not ignore the possibility that the third parties to whom the plaintiff's counsel referred in his submissions may be prepared to acquire the Westpac mortgage in an effort to preserve the plaintiff's right to reside in the property. There was, however, no direct evidence of how this would be achieved. Even assuming that such a transaction could be achieved - and in my view that is a significant assumption - I think that, ultimately, it has the capacity to complicate an already difficult and complicated situation. The number of parties with the potential to claim an interest in the property would increase. Even if one assumes in the plaintiff's favour that he establishes an interest in the property, the first defendant may commence a partition action in an attempt to force a sale of the property by means of applying for a sale in lieu of partition.
I am very mindful that discharging the plaintiff's caveat and allowing the sale of the property to proceed will cause the plaintiff difficulty and disruption. Regrettably, I fear that whatever course is taken today the plaintiff will face difficulties and disruption sooner or later.
A potentially difficult issue is how the net proceeds of sale after repayment of the debt to Westpac should be applied. This issue requires a balance to be struck between the interests of the plaintiff and the third defendant, and the interests of the first defendant and the vendor of the property the first defendant has agreed to buy, assuming that the first defendant will be unable to settle the purchase of the property if she does not obtain the preferred orders sought by her.
I am concerned that making orders allowing the first defendant to use $379,000 out of the net proceeds of sale to fund the purchase of another property would work an injustice on the plaintiff. The plaintiff would be left with $20,000 to re‑house himself and he will have no access to the funds held in trust either to assist him with his further housing needs or to fund the legal costs of establishing the extent of the interest held by him and the third defendant in the property. On the other hand, the first defendant would have secured for herself approximately 70% of the net proceeds of sale. If the plaintiff's claim to a 50% interest in the property were to succeed, he would be entitled to a monetary judgment in excess of the amount that remained in trust, and in order to enforce this judgment, he would be obliged to take action to compel the first defendant to sell her new property.
Against that background, I am not satisfied that the balance of convenience favours either of the courses that are the preferred options of the plaintiff or the first defendant. With considerable reservation, I consider that the appropriate disposition is to order the removal of the caveat, and to make orders preserving the net proceeds of sale of the property.
In my assessment, the most appropriate way in which to balance the interests of the parties would be for all of the net proceeds of sale to be placed into a trust account pending the determination of the issue of the extent of the plaintiff's claim other than for the payment of $20,000 to each of the plaintiff and the first defendant.
I propose that a hearing of the plaintiff's claim to an interest in the property be expedited. It is a relatively simple claim and should be capable of resolution within a matter of weeks. I am prepared to set aside trial dates now to ensure that the claim is determined expeditiously.
I appreciate that the outcome that is reflected in the orders that I propose exposes the first defendant to a potential claim at the suit of the vendor of the property she has agreed to buy. She has, however, brought that situation about and its consequences should not be visited upon the plaintiff.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JB
Associate to the Honourable Justice Tottle26 MARCH 2019
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