Burns v Bayliss
[2006] WASC 102
•2 JUNE 2006
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: BURNS & ORS -v- BAYLISS & ORS [2006] WASC 102
CORAM: BLAXELL J
HEARD: 26 APRIL 2006
DELIVERED : 2 JUNE 2006
FILE NO/S: CIV 1359 of 2006
BETWEEN: BEVLY COLIN BURNS
PETER WAYNE BURNS
LYNETTE SYLVIA PUTRINO
PlaintiffsAND
PAMELA CHARMAINE BAYLISS
DARYL LAWRENCE BAYLISS
First DefendantsREGISTRAR OF TITLES
Second Defendant
Catchwords:
Caveats - Application to extend operation of caveat - Caveat lodged by beneficiaries of deceased estate still subject to administration - Caveat lodged against land held by deceased and first defendants as joint tenants, but previously held by them as tenants in common - Transfer to joint tenancy in circumstances of alleged unconscionability - Whether plaintiffs have standing to apply for extension of caveat - Whether plaintiffs have a caveatable interest
Legislation:
Transfer of Land Act 1893 (WA), s 137, s 138B, s 138C
Result:
Order extending operation of caveat
Category: B
Representation:
Counsel:
Plaintiffs: Mr T M Hobday
First Defendants : Mr C D Clifton
Second Defendant : No appearance
Solicitors:
Plaintiffs: Lewis Blyth & Hooper
First Defendants : Martin de Haas Commercial Lawyers Pty Ltd
Second Defendant : No appearance
Case(s) referred to in judgment(s):
Bridgewater v Leahy (1998) 194 CLR 457
Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321
Connell v Bond Corporation Pty Ltd (1992) WAR 352
Costa & Duppe Properties Pty Ltd v Duppe [1986] VR 90
Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42
Frazer v Walker [1967] AC 569
Halse v Embling, unreported; FCt SCt of WA; Library No 970734; 22 December 1997
Hughes v National Trustees Executors and Agency Co of Australasia Ltd (1978 - 1979) 143 CLR 134
Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306
Porter v McDonald & Registrar of Titles [1984] WAR 271
Ramage v Wayclaw (1988) 12 NSWLR 84
Re Atkinson (Dec) [1971] VR 612
Stainton v Carron Co [1854] 52 ER 58
Case(s) also cited:
Bahgat v ASC (1995) 16 ACSR 536
Ford & Marshall v Marshall [2003] WASC 116
Horton v Jones (1935) 53 CLR 475
J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546
Livingston v Commissioner of Stamp Duties (Qld) (1960) 107 CLR 411
BLAXELL J: This is an application under s 138C of the Transfer of Land Act 1893 (WA) ("the Act") to extend the operation of a caveat against land of which the first defendants and Bevly John Furniss Burns ("the deceased") are registered as proprietors. The improvements on the land include a duplex dwelling, the front of which was occupied by the deceased until his death on 7 February 2005. At all material times the first defendants have occupied the rear duplex on the land.
The land was formerly held by the registered proprietors as tenants in common, with the deceased and the first defendants being respectively entitled to one‑half shares. However on 17 February 2004 the registered proprietors transferred the land to themselves as joint tenants. The plaintiffs allege that this transaction occurred as a result of unconscionable conduct on the part of the first defendants.
The Public Trustee is the executor of the deceased's estate, and the plaintiffs as well as the first‑named first defendant are all beneficiaries. The estate is still subject to administration, and to date the executor has not taken any step in respect of the allegedly unconscionable transaction.
By action No 1203 of 2006 in this Court, the plaintiffs seek a declaration that the first defendants hold their interest in the land on certain trusts said to accord with the deceased's last will and testament. By the caveat the subject of the present application, the plaintiffs also claim an interest in the land as "equitable co‑owners".
The facts alleged
The evidence before me includes a copy of the plaintiffs' statutory declaration lodged in support of the caveat, and the relevant portions read as follows:
"1.We are respectively the sons and daughter of the late BEVLY JOHN FURNISS BURNS who died on 7 February 2005 ('the Deceased').
2.The Deceased is registered as a joint registered proprietor together with DARRYL LAWRENCE BAYLISS ('Darryl') and PAMELA CHARMAINE BAYLISS ('Pam') all of 46 Collins Street, Yokine more particularly described as Swan Location 5635 and Portion of Swan Location 828 and being all of the land comprised in Certificate of Title Volume 1503 Folio 978 ('the Yokine Property').
3.The Yokine Property was previously jointly owned by the Deceased and our late mother SARAH KATHLEEN SYLVIA MYRTLE BURNS ('Sarah') (together 'our Parents').
4.Darryl is our brother‑in‑law and Pam is our sister.
5.Our Parents resided in the front portion of a building built on the Yokine Property pursuant to an agreement between Darryl, Pam and our Parents whereby our Parents would reside in the front half of the building and Darryl and Pam would reside in the back half. Our Parents agreed that if Darryl and Pam paid for the construction of a dwelling that could be divided into two strata title units and to pay for the said subdivision our Parents would give to them one of the strata title units.
6.The Yokine property was transferred to our Parents as joint tenants of one half share and Darryl and Pam as joint tenants of one half share as tenants in common on 16 October 1995. On that same date a mortgage to provide funds to build the residence was registered over the property to Challenge Bank Ltd.
7.Sarah died on 17 March 2003 and on 26 June 2003 our father became the registered proprietor of one undivided half share as tenants in common with Darryl and Pam.
8.We are aware of the arrangements about the building made between our parents and Darryl and Pam because our parents discussed those arrangements with each of us on a number of occasions. Our parents also showed us copies of their Wills which each provided that their four children would take an equal quarter share of their estate.
9.During his lifetime the Deceased told each of us on more than one occasion that the back half of the house would be solely owned by Darryl and Pam and the front half in which he resided would be left as to one quarter each to we these Declarants and Pam.
10.The Deceased has suffered from emphysema for a number of years and when our mother died on 17 March 2003 the Deceased's medical condition worsened. We had to arrange for Silver Chain to assist with the care of the Deceased so that he could remain at his home notwithstanding his worsening medical condition. Pam also took care of our father.
11.As our father's health deteriorated he told us he was concerned about being able to stay in the home for as long as possible. He said he was worried that Pam would not continue to take care of him.
12.On 17 February 2004 the tenancy of the registered proprietor was changed from one of tenants in common to a joint tenancy. None of Pam, Darryl or our father told us about the change of tenancy.
13.In about March 2004 Pam told us that she was not happy looking after our father and that she had made inquiries with our father's doctor to see if our father could be transferred into a home or hospital at her request. However as 2004 progressed our father stayed in the house and was not transferred to a home or hospital. We thought the issue of our father's care arrangements between him and Pam had been resolved.
14.Shortly after our father died on 7 February 2005 Pam told Bevly and Peter that our father had given her the house. We later searched the title for the Yokine property and discovered it had been transferred to Darryl, Pam and our father as joint tenants on 17 February 2004 and that upon our father's death Darryl and Pam were entitled to become the joint owners of the Yokine property by survivorship.
15.We believe that when our father transferred the Yokine property to himself, Darryl and Pam as joint tenants, Pam and/or Darryl induced our father to enter into an improvident transaction that was not fair, just or reasonable.
... "
(The first defendants object to admission of pars 8 and 9 above on the ground that the alleged statements of the deceased are hearsay. However I rule that these statements of testamentary intention are admissible pursuant to Hughes v National Trustees Executors and Agency Co of Australasia Ltd (1978 - 1979) 143 CLR 134, 137 ‑ 138.)
On 13 April 2005 the Public Trustee was granted probate of the deceased's last will and testament which was dated 6 July 1991. Pursuant to that Will:
(1)The deceased devised and bequeathed his interest in "the realty situate at and known as 46B Collin Street, Yokine (the rear dwelling)" to his daughter Pamela Charmaine Bayliss, and his residual estate to his wife.
(2)In the event of his wife not surviving him, the deceased devised the "land situate and known as 46A Collins Street, Yokine (the front house property)" to his trustee upon trust for his daughter Pamela "until her death or until the said property can be strata titled (whichever event shall first occur this being known as the date of determination)".
(3)The deceased also directed his trustee to give Pamela "as soon as practicable after the date of determination" an option to purchase his interest in "the house and land situate at 46A Collins Street, Yokine ('the house property') (other than the share of the house property to which she is entitled as devisee under this Will)", at a price to be determined by a licensed valuer.
(4)The deceased devised the residue of his estate to his trustee upon trust for division into four equal parts for distribution to the plaintiffs and to his daughter Pamela.
Prior to commencing their action against the first defendants, the plaintiffs approached the Public Trustee with their concerns about the transaction on 17 February 2004. At that time they were told that the Public Trustee did not intend to provide advice or take action in respect of the Yokine property ("the land"). However, the Public Trustee has recently indicated that it may be prepared to reconsider its position.
The plaintiffs seek to adduce evidence of recent conversations with the second‑named first defendant but that evidence is clearly irrelevant to the question of whether or not there is a caveatable interest. I rule that it is inadmissible.
The first defendants have not filed any affidavit in response to the plaintiffs' allegations.
The plaintiffs' standing
The first defendants contend that the interest said to be protected by the caveat can only be claimed by the executor on behalf of the deceased's estate, and that the plaintiffs therefore have no standing to bring their application. In that regard, the general rule would appear to be that:
" ... The persons interested in the estate of the testator, not being the legal personal representatives, will not be allowed to sue the persons possessed of assets belonging to the testator, unless it is satisfactorily made out that there exist assets which might be recovered, and which but for such suit, would probably be lost to the estate." (Stainton v Carron Co [1854] 52 ER 58, 61 ‑ 62)
Similarly, in Ramage v Wayclaw (1988) 12 NSWLR 84, 91, it was held that in exceptional circumstances where a trustee refuses to institute proceedings to recover trust property, a beneficiary may bring proceedings in his or her own name for equitable relief.
An application under s 138C of the Act to extend the operation of a caveat, is not a claim for recovery of property or for equitable relief, but is a proceeding of a unique statutory character. In my opinion, the question of the plaintiffs' standing to bring the present application does not really arise, because it merges with the question of whether they can claim an interest capable of being protected by caveat.
In this regard, a caveat can be lodged by any person "claiming" an estate or interest of a type as stipulated in s 137. If a notice is then served under s 138B, the caveator has the right to apply under s 138C for an order extending the operation of the caveat. Accordingly, the mere fact that a caveator is served with such a notice gives that caveator standing to bring the application. In the present instance, the submissions by the first defendants as to the plaintiffs' lack of standing really go to the question of whether or not there is in fact a caveatable interest.
The principles governing the application
Section 138C of the Transfer of Land Act 1893 (WA) provides the Court with a discretion to extend the operation of a caveat if "satisfied that the caveator's claim has or may have substance". This requirement will be met if there is evidence before the Court to show that the claim to an interest in the property does raise a serious question to be tried: (Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42, 48).
In order to establish that there is such a "serious question", it need only be shown that the claim is more than merely frivolous or vexatious, and that on the evidence before the Court the caveator might ultimately succeed in establishing the interest on which the caveat purports to be founded: (Halse v Embling, unreported; FCt SCt of WA; Library No 970734; 22 December 1997).
Once it is established that there is such a serious question, the Court will exercise its discretion having regard to the same factors that are relevant to an application for an interim injunction: (Porter v McDonald & Registrar of Titles [1984] WAR 271, 276). Accordingly, the caveator:
" … must go on to show that on the balance of convenience it would be better to maintain the status quo until the trial of the action, by preventing the caveatee from disposing of his land to some third party." (Eng Mee Yong v Letchumanan [1980] AC 331)
In the present instance the first defendants have not tendered any evidence nor made any submissions concerning the balance of convenience. It follows that the only real question to be determined is whether the plaintiffs have established that there is a serious issue (in the sense of an arguable case) as to the existence of their claimed caveatable interest.
Whether the claimed interest has substance
I can only be satisfied that the claimed interest "has or may have substance" if it is arguably a proprietary interest in the land. As was stated by Owen J in Custom Credit (ibid) at 50:
"By its very nature, a caveatable interest must be a proprietary interest in land. The purpose of the caveat is to restrain the registered proprietor from dealing with the land in a way which will defeat or derogate from the incidents attaching to that proprietary interest until the respective rights of the parties have been honoured (if there is agreement) or determined (if there is disagreement). In many cases, removal of the caveat will have the effect of destroying for all practical purposes, the benefit of the proprietary interest."
The plaintiffs' claim to a caveatable interest in the land, faces two hurdles. Firstly, the plaintiffs' status as beneficiaries of the deceased's estate does not give them any legal or equitable ownership in the assets of the estate. Secondly, there is the question whether the claimed entitlement to equitable relief in respect of the alleged unconscionability of the transaction on 17 February 2004 constitutes a proprietary interest in the land.
Dealing with the first of these issues, the High Court held in Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306, at 312 ‑ 314, that:
"Not only does the legal ownership in the property not vest in the named beneficiary at the time of death of the testator, nor does the equitable ownership. That emerges from the Privy Council's decision in Commissioner of Stamp Duties (Q) v Livingston (1964) 112 CLR 12; [1965] AC 694. The reason for this is that, prior to administration of the deceased estate, there is no specific property capable of constituting the subject property of any trust in favour of the beneficiary. It could not be said at that stage what part or parts of the testator's property would need to be realized for the purposes of administration. So it was held that the beneficiary does not have a proprietary interest in each of the assets which are the subject of the devise or bequest such that he or she can say 'this is mine' or 'this belongs to me'. ...
The right which any beneficiary has in an unadministered estate springs from the duty of the executor to administer the estate, to preserve the assets and to deal with them in the proper manner. Each beneficiary has an interest in seeing that the whole of the assets are treated in accordance with the executor's duties. In that sense, the beneficiaries as a class may be said to have an interest in the entire estate. But it does not follow that each piece of property which goes to make up the estate is held on a particular trust for the beneficiary named as its intended recipient upon completion of administration: Horton v Jones (1935) 53 CLR 475 at 486. Whether or not the estate is held on a trust for the beneficiaries as a class in the usual sense in which the word 'trust' is used, so as to confer a specific proprietary interest, as distinct from a general, non‑specific interest, upon all beneficiaries, is not something which arises for consideration in this case."
If the beneficiaries as a class do have a specific proprietary interest in the whole of an estate, their situation is not dissimilar to that of unit holders in a unit trust. In Costa & Duppe Properties Pty Ltd v Duppe [1986] VR 90 a unit holder in a unit trust lodged a caveat claiming an equitable interest in land held by the trust. The trust deed provided that each unit holder was entitled to a beneficial interest in the trust fund as an entirety but not to an interest in any particular security or investment. In these circumstances, Brooking J held that the unit holder had a sufficient interest in the land to support a caveat, because he held a proprietary interest in all of the property of the trust.
The interest of beneficiaries in the entirety of a deceased's estate is perhaps also similar to the share of a partner in the assets of a partnership. Pursuant to s 33 of the Partnership Act 1895 (WA):
"The share of a partner in the partnership property at any time is the proportion of the then existing partnership assets to which he would be entitled if the whole were realised and converted into money, and after all the then existing debts and liabilities of the firm had been discharged."
In Connell v Bond Corporation Pty Ltd (1992) WAR 352, Malcolm CJ determined that a partner holding a share in a partnership (the assets of which included land) had a proprietary interest in that land which was capable of supporting a caveat. His Honour noted (at 365) that a share in a partnership was in the nature of an equitable chose in action because "the bundle of rights which constitute a share are rights which were traditionally enforceable in equity". Nevertheless:
"A partner has a proprietary interest in all the partnership property for the time being in the same way as the unit holder in the unit trust. A partner also has a proprietary interest in each and every asset of the partnership in the same way as the unit holder. Neither of them has a specific title in any individual asset. Neither of them can claim to have any particular asset appropriate to his share or transferred to him. Each of them has a special and non‑specific equitable interest, but it is nonetheless a proprietary interest. In my opinion it necessarily follows that the plaintiffs have a caveatable interest in the land." (Malcolm CJ at 374.)
In Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321, 328, the High Court also considered the nature of a partner's interest and compared it to that of a residuary legatee in an unadministered estate:
"The appellant submitted that the nature of a partner's interest was analogous to that of a residuary legatee in an unadministered estate. There is some similarity between the two cases in that the residuary legatee and the partner each have the right to insist upon due administration, the former of the estate and the latter of the partnership assets and liabilities, and the precise entitlement of each must await the due course of administration. Nevertheless we think that the interest of the partner in an asset of the partnership is sui generis."
The facts in Re Atkinson (Dec) [1971] VR 612 are pertinent to the present matter, in that the executor of an estate had declined to commence proceedings for equitable relief against one beneficiary at the request of the other beneficiaries, in the absence of an indemnity. The executor then sought directions from the Court as to whether it was obliged to take action, and Gillard J (at 616 ‑ 617) held:
"Undoubtedly, the proper party ordinarily to obtain an equitable remedy would have been the trustee company. But as I have already stated, I am inclined to the view that it should be excused from doing so. Then, in my view, the beneficiaries have sufficient equity to obtain the remedy when the trustee company would have been entitled to obtain but which it was excused from seeking. The difficulty of defining a beneficiary's interest in the assets of an unadministered estate as understood in Australian authority referred to by Viscount Radcliffe in Livingston's Case might be overcome by adopting the distinction in the expressions 'equitable estate' and 'equity' referred to by Kitto J, in Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liquidation) (1965) 113 CLR 265, at p 277; [1966] ALR 775. In my opinion, each of the beneficiaries here at least has 'an equity' to entitle him or her to seek on behalf of the estate in a Court of Equity the remedy of a declaratory judgment."
In my view, a reasonable consideration of the above authorities indicates that the present plaintiffs have at least an arguable case that they hold a proprietary interest in the assets of the deceased's estate. Certainly, it could not be suggested that this aspect of their claim is frivolous or vexatious.
I now turn to the second issue concerning the nature of the plaintiffs' claim (purportedly on behalf of the estate) impugning the deceased's transaction with the first defendants on 17 February 2004, and whether or not that claim is for a proprietary interest in the land. The unconscionability of the transaction is not said to arise from positive conduct on the part of the first defendants, but from their passive acceptance of the benefit of an improvident transaction that was not fair, just or reasonable. In this regard, the plaintiffs rely upon the authority of Bridgewater v Leahy (1998) 194 CLR 457 where a majority of the High Court (at 478 ‑ 479) noted that:
"In Australia, it has been recognised that unconscionable conduct is a ground of relief which will be available 'whenever one party by reason of some condition or circumstance is placed at a special disadvantage vis‑á‑vis another and unfair or unconscientious advantage is taken of the opportunity thereby created' Amadio (1983) 151 CLR 447."
And went on to state:
"In Commercial Bank of Australasia Ltd v Amadio (at 474), Deane J spoke of unconscionable conduct as occurring where, in the circumstances, it is unconscientious to 'procure, or accept, the weaker party's assent to the impugned transaction'. It also should be noted that in Hart v O'Connor [1985] AC 1000, an appeal from New Zealand, the Privy Council described unconscionable conduct which provided a basis for equitable relief as 'victimisation, which can consist either of the active extortion of a benefit or the passive acceptance of a benefit in unconscionable circumstances'."
The majority in Bridgewater v Leahy also held (at 490):
"The position of disadvantage which renders one party subject to exploitation by another such that the benefit of an improvident disposition by the disadvantaged party may not in good conscience be retained may stem from a strong emotional dependence or attachment. Louth v Diprose (1992) 175 CLR 621 was such a case. In his judgment in the South Australian Full Court, a decision which was upheld in this Court, Jacobs A‑CJ said:
'It is an oversimplification to say that because the respondent acted as he did with his eyes open, and with a full understanding of what he was doing, he was not in a position of disadvantage, and therefore not the victim of unconscionable conduct.'
There are passages in the reasons of the primary judge which appear to suggest that the existence of such a position of disadvantage necessarily involves physical frailty and enfeeblement with diminished knowledge by the party in question of that party's property and affairs generally. That will not necessarily be the case."
In the present instance the relevant facts alleged are that on more than one occasion the deceased expressed an intention to devise his interest in a one half share in the land to all four of his children. The residuary dispositions in his Will are broadly consistent with that intention. At the time of transferring his interest into the joint tenancy he was in ill health, concerned about being able to stay in his home, and worried about his future care. Furthermore, on the basis of the limited evidence presently available, there would not seem to be any sensible motive or reason for the deceased to have converted his interest into a joint tenancy.
It is in these alleged circumstances that the first defendants accepted the benefit of the transaction on 17 February 2004. The first defendants have not adduced any evidence to contradict the plaintiffs' assertions, and in my view there is at least an arguable case that they accepted the benefit of the transaction in unconscionable circumstances.
In the event that the plaintiffs are successful with their claim, they may be entitled to an order setting aside the transfer of 17 February 2004. This being so, their claim is clearly of a proprietary nature because it has the potential to divest the first defendants of a presently registered interest in the land. In this regard, it is relevant to note that in Frazer v Walker [1967] AC 569 the Privy Council held (at 585) that the principle of indefeasibility under the Torrens system:
" ... in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or in equity, for such relief as a court acting in personam may grant."
I have considered whether the caveat correctly specifies the interest claimed by the plaintiffs (as "equitable co‑owners"). The claim is to an equity to set aside the joint tenancy and to restore the tenancy in common, and therefore can reasonably be described as an equitable claim to co‑ownership. Given that the claim is on behalf of the estate the interest should more correctly be expressed in the singular rather than in the plural, but nothing really turns upon this.
For all of the above reasons I am satisfied that the plaintiffs' claim may have substance. As no issue has been raised as the balance of convenience, it follows that there should be an order extending the operation of the caveat.
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