Carnovale v Nardella (No 2)
[2018] VCC 2233
•10 August 2018
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-18-02302
| MARIA JESSOPINA CARNOVALE | Plaintiff |
| v | |
| MICHAEL NARDELLA AND GIUSEPPINA NARDELLA AND REGISTRAR OF TITLES | First Defendant Second Defendant Third Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 10 August 2018 | |
DATE OF RULING: | 10 August 2018 | |
CASE MAY BE CITED AS: | Carnovale v Nardella & Ors (No 2) | |
MEDIUM NEUTRAL CITATION: | [2018] VCC 2233 | |
R U L I N G
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. Levine | Maciel Pizzorno & Co |
| For the Defendants | Mr R Forrester | Randles Cooper Lawyers |
HIS HONOUR:
1 I have before me a summons brought by Ms Carnovale in which she seeks orders having the effect of removing caveats lodged by Mrs Nardella against the title of a residential property in Dredge Street, Reservoir, and an industrial property in Mahoneys Road, Thomastown, the registered proprietor of which is Mr Michael Nardella.
2 Mr and Mrs Nardella are former spouses, having undergone orders of dissolution of their marriage earlier this year. They began a de facto relationship in 1993. According to the affidavit material, in 1997, a property in Dredge Street, Reservoir, was acquired by Mr Nardella from his parents. The transfer registered under the Transfer of Land Act shows a consideration of $80,000 as the purchase price of the property. Mrs Nardella says that out of a property settlement of $26,000, which she received from the termination of a previous marriage, she contributed some $5,000 towards the acquisition of the Dredge Street property. She does not detail precisely how this $5,000 was applied. The evidence shows that a mortgage back was granted by Mr Nardella to his parents, which was discharged in 1997. The circumstances of this discharge again are not disclosed. It may have been by payment in full, it may have been by debt forgiveness, there may be some other option or possibility. Despite this, according to Mrs Nardella, in the years which followed when she and Mr Nardella were living together as husband and wife, from time to time Mr Nardella asserted that it was necessary to pay off his parents. These statements were allegedly made after 1997 when, on the face of it, the mortgage had been discharged. Mr Nardella is, and remains, the sole registered proprietor of the residential property. In 2013, with the assistance of a loan from Perpetual Trustees secured, it appears, amongst other things, by a mortgage over the Dredge Street property, he acquired, once again in his sole name, an industrial property to be used for the conduct of a motorcycle business in Mahoneys Road, Thomastown. Mrs Nardella does not contend that she provided any direct monetary contribution to this acquisition.
3 In 2013, Mr Nardella signed a document styled Partnership Agreement and Contract between Parties, himself and the plaintiff, Ms Maria Carnovale. This provided for conduct of a motorcycle business at the Thomastown premises under the style Reservoir Hobbs and Australian Motorcycle Compliance Workshop Pty Ltd. Mrs Carnovale was, according to the terms of this agreement, to be a silent partner in this enterprise. The documentation also provided for Mrs Carnovale to be repaid a loan of $250,000 on 11 August 2023.
4 Mrs Carnovale has obtained a judgment for the payment of that loan and an adjudication that she has an interest as chargee over the residential property and the business premises. She has brought this proceeding seeking the removal of the caveats which have been lodged in the recent past by Mrs Nardella, in which Mrs Nardella claims interests in the two properties under resulting or constructive trusts. Mrs Carnovale’s contention is that these caveats should be removed to enable her to enforce her security rights as against the two properties. At present, no distinct enforcement step has been taken to market the properties, but the existence of the caveats necessarily precludes an effective sale by her. She does not hold a mortgage registered under the terms of the Transfer of Land Act 1958.
5 Mrs Nardella has pending proceedings under the Family Law Act, s79, for the readjustment of property interests between her and her former husband, Mr Nardella. Those proceedings stand fixed for hearing in October of this year. When the matter came on before this Court initially, the only matters urged on Mrs Nardella’s behalf for the maintenance of the two caveats were the prospect that she would obtain a favourable adjustment of property rights from the Federal Circuit Court, pursuant to s79 of the Family Law Act. Mr Levine, who appeared on that occasion for Ms Carnovale and appears today representing her, contended, correctly as it seemed to me, that the prospect that a court might, in exercise of a power under s79, readjust property rights between spouses or former spouses in the future did not entail the existence of a proprietary interest in one of the spouses who, under the general law, was not the registered owner. Such an entitlement was prospective and maintenance of the caveats required a finding that Mrs Nardella either had, or arguably had, an existing proprietary interest in the two properties. On Mrs Nardella’s application, I adjourned the matter over to enable her to put on affidavit material which might demonstrate a pre-existing proprietary interest in the property which would justify the maintenance of the caveats.
6 It was common ground between the parties that a determination in these circumstances should be guided by the approach adopted by Warren CJ in Piroshenko v Grojsman & Ors (2010) 27 VR 489, where her Honour considered the proper approach would be for the Court to consider, first, whether there was a serious question to be tried or a prima facie case supporting the claims of the caveator, and, secondly, to consider whether, assuming such existed, the balance of convenience favoured the maintenance of the caveat on the one hand, or its removal on the other. In this respect, her Honour aligned the considerations which might guide the Court with those which would guide it in determining whether to grant or refuse an interlocutory injunction.
7 When the matter returned today, Mrs Nardella was represented by Mr Forrester of counsel. He said, first, that the contribution which Mrs Nardella deposed to of $5,000 as part of an $80,000 acquisition price for the residential property created a resulting trust. Mr Levine, in response, did not deny the proposition that a contribution of purchase price, as distinct from the making of payments to pay off a mortgage debt, was apt to create an entitlement of resulting trust in favour of someone who was not registered as owner on title. He observed, however, that the $5,000 contribution represented no more than 1/16th of the total acquisition price, and, as a percentage, represented something like 6⅔ percent of the entire purchase price. He did not submit, as I understood him, that this represented a de minimis contribution which should be disregarded altogether, but contended that the relative smallness of the contribution should be a matter for consideration in determining where the balance of convenience lay, if it were necessary to analyse that issue.
8 Mr Levine drew attention to the vagueness of the evidence as to precisely how this $5,000 contribution was applied to the purchase of the house. The evidence was, he said, quite obscure as to exactly how this transaction had gone forward. In my view, in the circumstances I should conclude, in accordance with Warren CJ’s approach, that there is a serious question to be tried or a prima facie case that Mrs Nardella is entitled to a resulting trust to the extent of approximately 6⅔ per cent of the Reservoir property.
9 Next, Mr Forrester contended that the evidence which appeared in the further affidavit of Mrs Nardella made good a contention that she was entitled to an interest as a beneficiary of a constructive trust in accordance with the principles considered by the High Court of Australia in Baumgartner v Baumgartner (1987) 164 CLR 137. In that case, Ms Baumgartner resided in a property, the registered owner of which was Mr Baumgartner. Mr Baumgartner was the mortgagee under the mortgage taken out to raise the funds for the purchase of the property. The Court found that the parties had pooled their aggregate earnings, with Mr Baumgartner contributing 55 per cent to the pool and Mrs Baumgartner 45 per cent to the pool. When the couple separated, Mr Baumgartner asserted that he should be regarded as the sole beneficial owner of the former matrimonial home. The High Court determined that, in the circumstances, Mrs Baumgartner should be regarded as having an entitlement as beneficiary of a constructive trust. In their joint judgment, Mason CJ and Wilson and Deane JJ said at (1987) 164 CLR 137, 149:
“In this situation it is proper to regard the arrangement for the pooling of earnings as one which was designed to ensure that their earnings would be expended for the purposes of their joint relationship and for their mutual security and benefit. To the extent which the pooled funds were the source of payment of mortgage instalments by the appellant [that is, Mr Baumgartner], the pooled funds contributed not only to present accommodation expenses but also to the security of the parties’ accommodation in the future. In this context it would be unreal and artificial to say that the respondent [that is, Mrs Baumgartner], intended to make a gift to the appellant of so much of her earnings as were applied in payment for mortgage instalments. There is no evidence which would sustain a finding that the respondent intended to make a gift to the appellant in this way.
The case is accordingly one in which the parties have pooled their earnings for the purposes of their joint relationship, one of the purposes of that relationship being to secure accommodation for themselves and their child. Their contributions, financial and otherwise, to the acquisition of the land, the building of the house, the purchase of furniture and the making of their home, were on the basis of, and for the purposes of, that joint relationship. In this situation the appellant’s assertion, after the relationship had failed, that the Leumeah property, which was financed in part through the pooled funds, is his sole property, is his property beneficially to the exclusion of any interest at all on the part of the respondent, amounts to unconscionable conduct which attracts the intervention of equity and the imposition of a constructive trust at the suit of the respondent.”
Mr Forrester submitted that these principles should be regarded as operative in the present case.
10 One might also refer to a summary of these principles by Sifris J in Hill v Burness [2018] VSC 29 at paragraph [129], where his Honour said:
“The contributions of a spouse through homemaking and parenting are viewed as ‘enabling’ their partner to earn income that may then be used to acquire, maintain or improve property, thus indirectly contributing to such property in a manner that may ground an equitable interest. In this way, a wife’s contribution as a homemaker should be recognised in a substantial, and not merely token, way, recognising that by her attention to the home and the children, the wife frees her husband to earn income and acquire assets.”
11 In the present case, said Mr Forrester, Mrs Nardella’s affidavit made good this scenario. He noted that, whilst in contrast to Mrs Baumgartner’s situation there was no evidence of her having surrendered a pay packet to her husband, according to Mrs Nardella’s evidence, she had from time to time worked for no remuneration in her husband’s business. She had also undertaken, by agreement with him, the traditional role of homemaker and mother to the children of the marriage. In that way, said Mr Forrester, she could be seen to have done what was necessary to entitle her to an interest as beneficiary of a constructive trust in accordance with the Baumgartner principle.
12 Mr Levine drew attention, however, to the fact that there was a general lack of specificity as to all of these matters. In particular, there was a lack of specificity as to when these events took place. He contended that, for the purposes of determining any question of contribution for the purposes of the Reservoir property, the line should be drawn as at the date of discharge of the parents’ mortgage in 1997. Mr Levine also took me to the manner in which Sifris J disposed of a similar claim in Hill v Burness. At paragraphs 138-141 of his Honour’s judgment, he dismissed the claims that were before him on these grounds, referring at each point to the lack of specificity and clear and convincing evidence. Mr Levine submitted that, in the present circumstances, I should adopt an identical approach and determine that the claim for a Baumgartner entitlement had not been made out.
13 In response, Mr Forrester said that it would be wrong to use 1997 as a cut-off date. He drew attention to Mrs Nardella’s account of the erection on the land in Reservoir of a garage of a relatively luxurious type which, according to Mrs Nardella, was in some senses superior to the residence itself. He contended that in the outlays that were made in the erection of this building, one could find a link between Mrs Nardella’s efforts and the improvement of the property, in accordance with the formulation adopted by Sifris J and quoted earlier. Further, he submitted, insofar as the industrial site at Thomastown was concerned, a similar link could be made both directly and indirectly. The Thomastown property seems to have been acquired for the purposes of Mr Nardella’s business. Any contributions to that business could therefore be regarded as sourced from Mrs Nardella insofar as her efforts were concerned. Moreover, if one accepted that she had an equitable interest in the Reservoir property, insofar as that property had been used as security for the acquisition of the Thomastown property, a link as to contributions could likewise be demonstrated.
14 In my view, the evidence of Mrs Nardella exhibits many of the flaws of lack of specificity and convincing detail which were identified by Sifris J in Hill v Burness. Nevertheless, his Honour was concerned with what seems to have been a final finding at trial. In accordance with the analysis of Warren CJ in Piroshenko’s case, I am concerned only to make a finding as to whether a prima facie case or a serious question to be tried has been established. In my view, Mr Levine was accurate in his characterisation of the limitations of Mrs Nardella’s evidence. However, with some hesitation, I conclude that the evidence was not so lacking in specificity as to fail to make out a prima facie case or a serious question to be tried. There were some references to proprietary estoppel and representations. These were relatively fleeting and, in my opinion, justifiably so. The alleged representations referred to by Mr Forrester were singularly vague and couched sometimes in terms of the impersonal passive — namely, what was agreed and what was understood and so on — and I think it appropriate to put those to one side on the basis that they do not make good, in my view, any serious question to be tried or prima facie case.
15 This then brings me to a consideration of where the balance of convenience lies, and here we were thrust into what, in other circumstances, might have been an intriguing constitutional analysis as to the convenient forum to investigate what seems to be an implicit but very firm conviction on the part of Mrs Nardella that there is something phoney about the judgment debt relied upon by Mrs Carnovale. It is hinted at, and I think ultimately the hint must be regarded as quite clear, that the whole thing is a sham aimed at blocking, delaying and embarrassing Mrs Nardella’s attempt to obtain a fair property settlement or skewing the analysis which would lead to a property settlement, such that the pot or pool of assets to be divided between the parties was artificially diminished by the face value of the alleged judgement debt.
16 Mr Forrester contended that the appropriate means of dealing with these issues was to maintain the caveats with a view to these matters of alleged collusion being determined by the Federal Circuit Court, in which the final determination of property rights is scheduled to occur in October of this year. He referred me to s90AE of the Family Law Act 1975, which authorised the Courts exercising the Family Law jurisdiction to make orders binding upon parties who are not parties to the marriage or domestic relationship. He submitted that these provisions in the statute were introduced for the express purpose of enabling the Courts exercising the Family Law jurisdiction to determine questions such as the one raised here as to the allegedly collusive judgment debt.
17 Mr Levine, on the other hand, submitted that this was a gross over-simplification of what, in his submission, was a very complex matter indeed. It was far from clear, he said, that the Federal Circuit Court would wish to assume jurisdiction and determine these matters. There was a strong possibility — I do not know that he went so far as to say likelihood — that the Court would defer to the existence of a judgment entered in this Court, and would, in effect, defer to a resolution of the alleged collusive nature of the judgment debt and the charge apparently securing it in this Court. At the very least, said Mr Levine, the introduction of these complex issues into the proceeding in the Federal Circuit Court would delay the hearing. He said that if the October hearing date were missed, a new hearing date would be sometime in 2019, and maybe in late 2019.
18 There then ensued a debate at the Bar table as to precisely how long any potential delay would be. It is unnecessary for present purposes to make any ultimate determination. I perceive, on the basis of accepting Mr Levine’s submission, that the introduction of the complicating issues and Mrs Carnovale’s position into the Federal Circuit Court dispute would lead to the final hearings being deferred to sometime in 2019. It is unnecessary for present purposes to consider exactly when that might be.
19 Where then does that leave the balance of convenience? In one sense, I think a Court exercising the Family Law jurisdiction would be as well qualified and perhaps better qualified than this Court to determine issues of contribution by a spouse to the joint enterprise of the family, especially in the case of contributions which are indirect by way of effort as a homemaker, rather than by the financial contribution of dollars. I agree that any such determination is unlikely to take place in the immediate future. On the other hand, the plaintiff has not urged before matters of substantial urgency as far as she is concerned. I have already noted that no particular enforcement step has been taken with regard to the enforcement of the charge which she has been determined to have as an unregistered chargee or mortgagee.
20 I consider that the prima facie case, or serious question to be tried, is of sufficient significance that it warrants further investigation to see where the truth lies. The precise way forward is unclear. Mr Levine has, I think, realistically set out a number of potential ways forward and the ball might be thought to lie in the court — without wishing to make a pun — of the Federal Circuit Court as to whether it desires to take these issues for its sole determination or to defer to this, or some other State Court standing outside the matrimonial jurisdiction. In my view, however, there is just sufficient evidence of some existing proprietary interest in the second defendant, Mrs Nardella, to render it inappropriate to remove the caveats which she has lodged relative to both properties.
21 Accordingly, the application for a summary removal of those caveats is dismissed.
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