Burghley Pty Ltd v Soames
[2021] VSC 236
•5 May 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2021 00212
BETWEEN:
| BURGHLEY PTY LTD (ACN 616 183 450) | Plaintiff |
| v | |
| MONIQUE ELIZABETH MARY SOAMES | First defendant |
| v | |
| THE REGISTRAR OF TITLES | Second defendant |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 4 February 2021 |
DATE OF JUDGMENT: | 5 May 2021 |
CASE MAY BE CITED AS: | Burghley Pty Ltd v Soames & Anor |
MEDIUM NEUTRAL CITATION: | [2021] VSC 236 |
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REAL PROPERTY — Caveat —Application to remove caveat — Estate or interest in land — Serious question to be tried — Balance of convenience — Caveator ordered to pay costs on an indemnity basis — Transfer of Land Act 1958 (Vic) s 90(3) — Piroshenko v Grojsman (2010) 27 VR 489; Goldstraw v Goldstraw [2002] VSC 491; Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189.
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiff | Mr B Parker | Kenna Teasdale Lawyers |
| For the first defendant | Mr D Connors | DSA Lawyers |
| For the second defendant |
HER HONOUR:
Burghley Pty Ltd (‘the plaintiff’) is the registered proprietor of a property situated at and known as 164 Arthurs Seat Road, Red Hill (‘the property’). Jonathan Cecil (‘Mr Cecil’) is the sole director and secretary of the plaintiff.
The plaintiff sold the property pursuant to a contract of sale dated 8 November 2021. Settlement of the sale was due to occur on 8 February 2021. Under the contract, the purchaser is entitled to serve a rescission notice unless agreement can be reached to extend the settlement date under the contract.
On 14 January 2021, Monique Elizabeth Mary Soames (‘the first defendant’) lodged caveat AT946071N on the title to the property claiming an implied, resulting or constructive trust (‘the caveat’).
By originating motion and summons filed 2 February 2021, the plaintiff sought an order, pursuant to s 90(3) of the Transfer of Land Act 1958 (Vic), directing the Registrar of Titles to remove the caveat against the title of the property.
The Registrar of Titles is named as the second defendant in the proceeding. By letter dated 3 December 2021, the Registrar informed the Court that she did not intend to appear in the proceeding.
Background
The first defendant is Mr Cecil’s former girlfriend. According to Mr Cecil, he lived with the first defendant from on or about 4 January 2017, when they moved into the property together, until 29 November 2018 when the first defendant vacated the property. The first defendant says she lived at the property with Mr Cecil from the date of settlement on or about 20 December 2016 until 24 December 2018.
Initially the property was purchased by Mr Cecil on 28 October 2016 and he paid the deposit of $160,000. Subsequently, Mr Cecil nominated the plaintiff as the purchaser. Settlement of this purchase took place on 20 December 2016. Mr Cecil advanced the necessary funds by way of a loan to the plaintiff to complete the purchase. The first defendant did not contribute any funds to the purchase price of the property.
Payment of stamp duty and other expenses amounting to $120,000 was paid by the plaintiff using funds borrowed from the first defendant pursuant to a written loan agreement. On 11 June 2018 those funds plus accrued interest at five per cent per annum were repaid to the first defendant.
Following the purchase of the property, Mr Cecil caused some limited renovations to be conducted on the property. Mr Cecil advanced the necessary funds to the plaintiff by way of loan for payment of the renovations. Mr Cecil also undertook some further cosmetic repairs and other works, such as minor paint work in the bathrooms, which he paid for personally. The first defendant assisted with the paintwork, which took approximately one to two days. The first defendant claims to have assisted with the renovations. Mr Cecil deposed that the first defendant may also have done some gardening at the property from time to time.
On 17 November 2020 the first defendant caused a caveat to be lodged over the property. The name of the caveator was the first defendant’s then solicitor, Lawyers By The Bay. After discussions with the solicitors for the plaintiff, the caveator withdrew the caveat on 10 December 2020.
On 24 December 2020 the first defendant issued a proceeding in the Federal Circuit Court of Australia seeking, inter alia, a declaration that she had been in a de-facto relationship with Mr Cecil (‘the Federal Circuit Court proceeding’). Initially the first defendant represented herself in the proceeding. Subsequently she was represented by Prudent Legal.
On 14 January 2021 Prudent Legal lodged the caveat claiming an implied, resulting or constructive trust. By letter dated 22 January 2021 to Prudent Legal, the plaintiff’s solicitor requested that Prudent Legal specify the basis upon which the first defendant asserted the caveat was held. By letter dated 25 January 2021, Prudent Legal responded as follows:
Ms Soames instructs a trust relationship exists between her, your client and the vendor of the property…
The matter is before the Federal Circuit Court. The merits of Ms Soames trust interest in the property will be decided in this jurisdiction. We believe such interest will be deemed a constructive trust interest.
Until such time as the matter is decided by the Federal Circuit Court, Ms Soames legitimately seeks to protect her interest in the property.
Ms Soames instructs she has no wish to disrupt or prevent the sale of the property from proceeding to settlement. She accordingly will lift the caveat, prior to settlement, if your firm provides an undertaking to retain all sale proceeds of the property in trust until a decision on her interest is made by the Federal Circuit Court.
Applicable principles
Section 90(3) of the Act provides that ‘[a]ny person who is adversely affected by any such caveat may bring proceedings in a court against the caveator for the removal of the caveat and the court may make such order as the court thinks fit’.
The relevant principles with respect to an application under s 90(3) of the Act were summarised by Warren CJ in Piroshenko v Grojsman as follows:
Caveats under the Torrens system are treated by the courts as analogous to applications for interlocutory injunctive relief. In so far as their registration is an administrative act, it is when application is made for their removal that the onus falls on the caveator to satisfy the two-stage test used by the court when deciding whether to exercise its discretion to grant interlocutory injunctive relief… This two-stage approach requires the caveator to establish that there is a serious question to be tried that they have the estate or interest which they claim in the land in question, and having done so, to establish that the balance of convenience favours the maintenance of the caveat on the Register of Titles until trial.
…
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.[1]
[1](2010) 27 VR 489, 491 [7], 493 [18] (Warren CJ) (citations omitted).
In Percy & Michele Pty Ltd v Gangemi, Macaulay J explained:
The reference to ‘probability’ in the first limb of what her Honour said must be satisfied is plainly qualified by the character of that probability as described in the second limb. Recalling what the High Court said in Australian Broadcasting Commission v O’Neill, showing a ‘prima facie case’ does not mean that a plaintiff must show that it is more probable than not that he or she will succeed at trial.[2]
[2][2010] VSC 530, [47] (Macaulay J) (citations omitted).
In order to establish that there is a serious question to be tried, the caveator must establish a ‘prima facie case with sufficient likelihood of success to justify the maintenance of the caveat’. [3]
[3] Piroshenko v Grojsman (n 1) 494 [22] (Warren CJ).
The onus falls on the first defendant as the caveator to establish that she has an interest in the property by reason of a resulting implied or constructive trust. As stated by Warren CJ:
Caveats are not ‘bargaining chips’. It is not sufficient for the caveator to establish a prima facie case that they have contractual, equitable or statutory rights against the caveatee; their interest or rights must attach to the property with respect to which the caveat has been lodged.[4]
[4]Ibid 495 [23] (Warren CJ), citing Goldstraw v Goldstraw [2002] VSC 491, [42] (Dodds-Streeton J).
Consideration
The first defendant made a number of attempts to establish the basis of the caveat. The first basis proffered was prior to the commencement of the proceeding when Prudent Legal stated in its letter dated 22 January 2021 that the first defendant’s instructions were that a trust relationship exists between her, Mr Cecil and the plaintiff. In an affidavit sworn on 4 February 2021 and filed on behalf of the first defendant, her solicitor did not identify any basis for lodging the caveat.
The second basis proffered was at the hearing when the first defendant claimed that her interest ‘is in relation to seeking to preserve her claim in the Federal Circuit Court proceeding’ and that the caveat was lodged in recognition of her rights under the domestic relationship between Mr Cecil and her. At the hearing the first defendant sought that $300,000 from the sale proceeds be held in trust pending the determination of her Federal Circuit Court proceeding. It was stated that this position was premised on the basis that she did not wish to stand in the way of the settlement of the property or cause any inconvenience to the plaintiff. The first defendant maintained that this position had been presented to the plaintiff’s solicitors in January 2021 prior to the commencement of this proceeding. Reference to the relevant letter dated 25 January 2021 from the first defendant’s solicitors shows that the first defendant’s position was that all sale proceeds be held in trust pending a decision of the Federal Circuit Court proceeding.
The authorities are clear that a relationship alone does not create a caveatable interest.[5] It follows that the first defendant’s Federal Circuit Court proceeding does not entitle her to claim an interest in the property. It is difficult to accept that the first defendant was acting bona fide when she had no basis to claim an interest in the property yet her position was that all sale proceeds be held in trust pending the outcome of the recently issued Federal Circuit Court proceeding.
[5]Goldstraw v Goldstraw (n 4) [27]–[28] (Dodds-Streeton J).
The Court rejected the first defendant’s submission that the actions of the first defendant did not amount to a situation where the caveat had been lodged for any collateral advantage or to bring any pressure to bear on the plaintiff. Her actions establish a serious misuse of the caveat procedure for an ulterior or collateral purpose.[6]
[6]Ibid [38]–[39] (Dodds-Streeton J).
The first defendant made a number of subsidiary submissions in relation to the maintenance of the caveat on the property. All of these submissions were rejected but will be mentioned for completeness.
The first submission was that the first defendant worked in a restaurant owned by Artnet International Pty Ltd, of which Mr Cecil was the director and shareholder, together with Pace Design Pty Ltd, of which he is the sole shareholder. The first defendant claims that she received only nominal wages that fell far short of the value of her actual contributions and that she is still owed wages.
Working in a restaurant may entitle the first defendant to claim a debt due but it does not entitle her to claim an interest in land and it does not give rise to a caveatable interest in the property.
The second was that she assisted with the renovations to the property, however, there is no reference to a joint endeavour in relation to the purchase of the property, such as a contribution by her.
The third was that the first defendant was removed as a shareholder of the first defendant. The plaintiff is the registered proprietor of the land and the shares in the plaintiff are owned by individuals. It was difficult to discern exactly what was the first defendant’s issue with the shares. In the affidavit sworn on 4 February 2021 and filed on behalf of the first defendant, her solicitor deposes that she felt pressured by Mr Cecil’s solicitor, Anthony Kelly, into resigning as a director of the plaintiff. Nothing is said about the shareholding. In his affidavit, Mr Cecil deposed that Mr Kelly provided the first defendant with a letter to sign and amend if she wished for the purpose of confirming with ASIC she did not hold the shares beneficially. An email from Mr Kelly states, inter alia, ‘I would ask you to sign and return to me something that you are happy with’. It is apparent from the email that Mr Kelly has not demanded that the first defendant sign the letter which was subsequently provided to ASIC.
There is no basis for the first defendant to claim more than two years later that she has an interest. Moreover, the removal of the shares from the name of the first defendant does not give rise to a caveatable interest in the property. In any event, other remedies would be available to the first defendant if there were truly a claim in respect of the shareholding under the Corporations Act.
The last claim was in respect of the loan of $120,000 by the first defendant. The first defendant said that there was $18,000 owing on the loan and it was alleged by counsel that the agreement also contained a charging clause. The evidence supported that the loan and interest was paid in full. Even if that were incorrect, the first defendant’s claim does not justify any of the grounds of an implied, resulting or constructive trust as claimed in the caveat.
As there is no basis for the caveat to remain on the title of the property, it is unnecessary to consider the balance of convenience, however, it is clear from the circumstances that the balance of convenience favours the plaintiff with the removal of the caveat carrying the lower risk of injustice.[7]
[7]Bradto Pty Ltd v State of Victoria (2006) 15 VR 65, 73 [35] (Maxwell P and Charles JA).
Costs
The plaintiff sought indemnity costs of the proceeding on the basis that special circumstances exist. In particular, it was submitted that:
(a) the caveat was lodged without a proper basis;
(b) the first defendant failed to respond properly to correspondence from the plaintiff’s solicitor articulating the basis of the caveat;
(c) that having regard to the history of this matter and the Federal Circuit Court proceeding, it is to be inferred that the caveat has been lodged and maintained for a collateral purpose to bear pressure on Mr Cecil in relation to the Federal Circuit Court proceeding and is made in ‘wilful disregard of known facts or clearly established law, as well as being the [commenced or continued] for an ulterior motive.’[8]
[8]Love v Kempton [2010] VSC 254, 19 (Forrest J)
In seeking indemnity costs against the first defendant, the plaintiff relies on a special costs order that is only made where the proceeding exhibits a special or unusual feature or special circumstances.[9] The authorities concerning the principles to be applied when a court, in the proper exercise of its discretion, may depart from the making the usual order for costs on a standard basis are well known and need not be set out in any detail.[10] What is most important for present purposes is whether the facts of the case support the making of a special order for costs.
[9]Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 63.28.
[10]Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; Ugly TribeCo Pty Ltd v Sikola [2001] VSC 189; Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) [2012] VSC 399 [12]–[18] (Croft J).
For the reasons set out, there was no proper basis for lodging the caveat. The plaintiff’s solicitor requested multiple times that the first defendant articulate the basis of the caveat. However, no proper attempt at an explanation was given. In looking at the circumstances of the caveat being lodged, it is to be inferred that the caveat was lodged as a bargaining chip in the Federal Circuit Court proceeding. Had the first defendant been properly advised she ought to have removed her caveat and avoided these proceedings.
The caveat is the second caveat lodged by or on behalf of the first defendant. The caveat was lodged approximately three weeks prior to settlement of the sale of the property. Such actions had real potential to obstruct the timely completion of the settlement. In turn, the rights of the plaintiff and the purchaser could have been affected and damage caused to their interests.
The Court was satisfied that these circumstances warranted a special costs order of an award of indemnity costs against the first defendant.
On 5 February 2021 the Court consequently ordered that the Registrar of Titles remove caveat AT946071N from the land in Certificate of Title Volume 09765 Folio 950 and that the first defendant pay the plaintiff’s costs of an incidental to the proceeding on an indemnity basis.
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