Drew v Drew
[2021] VSC 99
•1 February 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S CI 2017 04815
| JEANETTE DREW | Plaintiff |
| v | |
| VICTOR DREW | First Defendant |
| HELEN DREW (also known as HELEN KARRAS) | Second Defendant |
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JUDGE: | Efthim AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 6 November 2020 and 2 December 2020 |
DATE OF JUDGMENT: | 1 February 2021 |
CASE MAY BE CITED AS: | Drew v Drew & Anor |
MEDIUM NEUTRAL CITATION: | [2021] VSC 99 |
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PROPERTY – Rules 36.01(1)(a) and 36.01(1)(b) of the Supreme Court (General Civil Procedure) Rules – Leave to amend defence and counterclaim – Assignment of equitable interest in property – Whether amended pleadings have ‘any real prospect of success’ where applicant’s rights already determined by court order – Res judicata – Assignment of equitable chose in action without notice by assignor to assignee.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff/First Defendant by Counterclaim | Mr J L Evans QC | Sinisgalli Foster Legal Pty Ltd |
| For the First and Second Defendants/Plaintiffs by Counterclaim | Mr M Bearman, with Mr S Fuller | Russell Kennedy |
| For the Third Defendant by counterclaim | No appearance | Pearce Webster Dugdales |
HIS HONOUR:
The first defendant, Victor Drew (‘Victor’), has applied for leave to amend his existing defence and counterclaim dated 11 October 2018. Victor’s wife, the second defendant, Helen Drew (‘Helen’) has also applied to amend her existing defence dated 11 October 2018. The defence filed by both defendants is almost in identical terms.
An application by summons filed on 4 November 2019 was previously made to amend the defences and counterclaim. That application was heard by Lansdowne AsJ on 25 November 2019. On 11 March 2020, Lansdowne AsJ delivered written reasons refusing Victor’s application to file the proposed amended defence and counterclaim. By orders made on 1 April 2020, Lansdowne AsJ made orders in respect of a further application by Victor and Helen to amend the pleadings.
On 14 July 2020, Victor and Helen served further iterations of their proposed amended defences and Victor’s amended counterclaim. After receipt of submissions from the plaintiff, Jeanette Drew (Victor’s sister), the defendants did not seek to file and serve their proposed amended defence. That application was dismissed with costs by me on 26 August 2020.
The current amended pleadings seek to plead a case based on an assignment by Georgia Drew and Leslie Drew (the parents of Victor and Jeannette) to Victor of their alleged equitable interests in a property at 1 Mangalore Street, Travancore (‘the Property’). It also pleads a claim sought to be made against the plaintiff for breach of fiduciary duty or breach of trust pursuant to her capacity as executor of the estate of Leslie Drew.
The pleadings of the assignments are based on two documents:
(a) a document dated 13 November 1988 by which Georgia and Leslie assigned their interests in the Property to Victor (‘the Transfer Agreement’); and
(b) a document dated 11 September 2017 by which Georgia states that she assigned all of her interest in the Property to Victor (‘the 2017 Georgia Assignment’).
Victor has now abandoned the claim pursuant to the 2017 Georgia Assignment and also the claim against Jeanette for breach of fiduciary duty or breach of trust. The only issue before the Court is whether leave should be given to plead the Transfer Agreement.
Background
The plaintiff is the registered proprietor of the Property. Her brother Victor and his wife, Helen Drew, reside at the land situated next door to the Property. The plaintiff alleges that Victor and Helen wrongfully took possession of the Property, trespassed on the Property and continued to trespass on the Property. She claims that Victor and Helen have committed nuisance in respect of the Property and continue to commit nuisance.
The Property has now been sold. The plaintiff seeks compensatory or restitutionary damages, or in the alternative, exemplary or aggravated damages.
The Decision of Lansdowne AsJ
On 1 April 2020, Lansdowne AsJ ordered that Victor and Helen serve proposed amended defences and counterclaim revised as required to conform with her reasons of 11 March 2020. Her Honour allowed Victor and Helen to replead the Transfer Assignment and the 2017 Georgia Assignment. Her Honour said:
The defendants have withdrawn the proposed amendments to plead an adverse possession claim and I will refuse leave to plead the proposed amendment in relation to the loan. Although the proposed amendments in relation to the Assignment and the GD Assignment have survived the plaintiff’s objections in this application, I do not think the best course is to allow the defendants to proceed with those amendments as they are, in isolation of a review of the proposed pleadings as a whole. The objectionable proposed amendment relating to the loan is an integral part of the proposed amendments relating to the Assignment, and there may be other linkages that require review given the defendants’ partial success.[1]
[1] JD v VD & Ors [2020] VSC 110, [108].
The plaintiff submits that there was no scope to challenge the orders of Lansdowne AsJ and appeal her decision because no pleading had been allowed which entitled Victor to proceed to run with the counterclaim with which he now seeks to run, being a counterclaim based upon the efficacy of the Transfer Agreement.
The plaintiff also submits that the extent to which Lansdowne AsJ allowed the pleading to proceed, or indicated an intention to allow the pleading to proceed, the pleading now before the Court is not the same pleading. It does not contain one single word of the proposed pleading which was being considered by Lansdowne AsJ.
Victor asserts that as Lansdowne AsJ was plainly not wrong, I am bound to follow her and to allow the amendment.
As this is a new amendment, it is appropriate that I consider whether the pleading pleads a cause of action. Section 7 of the Civil Procedure Act 2010 (Vic) (‘the CPA’) prescribes that the overarching purpose in relation to civil proceedings is to facilitate the just, efficient, timely and cost‑effective resolution to the real issues in dispute. If the plaintiff is unable to plead a cause of action, then leave to file a further defence and amended counterclaim should be refused now and not when an application for summary judgment is made.
The Law
The application to amend is made pursuant to r 36.01(1)(a) and r 36.04(1)(b) of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’). Rule 36.01(1) provides:
General
(1) For the purpose of—
(a)determining the real question in controversy between the parties to any proceeding; or
(b) correcting any defect or error in any proceeding; or
(c)avoiding multiplicity of proceedings –
the Court may, at any stage order that any document in the proceeding be amended or that any party have leave to amend any document in the proceeding.
The test to be applied in determining whether an amendment is to be allowed is found in Mandie v Memart Nominees Pty Ltd,[2] where Kyrou J, Ferguson and McLeish JJA said:
The CP Act has changed the litigation landscape. One of the main purposes of that legislation is to reform practice and procedure in civil proceedings, including by reforming the law relating to summary judgment. More than ever, the focus is now pointedly on efficiency and cost-effectiveness, albeit that they are not the only, nor the predominant, considerations. One consequence is that amendments that might have been permitted previously may no longer be allowed. As such, the older authorities that preceded the CP Act which set out when a pleading amendment will be allowed must be approached with caution.
The power conferred on the court by s 63(1) of the CP Act to dispose of claims before a trial facilitates one of the stated purposes of the Act. Subject to limited exceptions, if a claim or defence has no real prospect of success, then summary judgment may be given. It must follow that a proposed pleading amendment raising a claim or defence of that type should not be permitted. To grant leave in that circumstance would be futile as the claim or defence would be susceptible to a summary judgment application. This principle facilitates the administration of justice, as it enables courts to prevent claims or defences being pleaded where they will inevitably fail and thus avoid the cost and inconvenience that would otherwise arise if those claims or defences were permitted to be made only to be the subject of summary judgment subsequently.
Since the introduction of the CP Act and the ‘no real prospect of success’ test, various authorities have used different language to explain what the test means.
According to Lysaght: a prospect which is not ‘real’ is ‘fanciful’; although the ‘no real prospect of success’ test in s 63(1) of the CP Act is more liberal than the common law test of ‘hopeless’ or ‘bound to fail’, there may not be much difference between them in practice; and, properly understood, a real question to be tried is one which realistically might result in the respondent to an application for summary judgment succeeding in the proceeding.
In Utility Services Corporation Ltd v SPI Electricity Pty Ltd, a set of pleading amendments were refused at first instance. The proposed amendments depended upon a particular construction of the proportionate liability provisions of the Wrongs Act 1958 which the primary judge determined had no reasonable prospect of success. He went on to say that he was satisfied that the proposed amendments were futile. The pleading amendments were allowed on appeal. Dixon AJA, delivering the leading judgment, described the proposed pleading as one which was not ‘fanciful or futile.’ In reaching this conclusion, he endorsed the ‘no real prospect of success’ test in s 63(1) of the CP Act. Beach AJA agreed that the appeal should be allowed. He had initially been persuaded that the construction of the legislation preferred at first instance was correct but was later satisfied that an alternative construction was at least as powerful as that preferred by the trial judge. He was satisfied that the proposed amendments were therefore ‘arguable’ and should be allowed. Bongiorno JA agreed with Beach and Dixon AJJA. In doing so, he took the view that the basis of liability alleged in the proposed pleading was not ‘unarguable.’ Essentially, the Court allowed the amendments because it could not be said that they had no real prospect of success. The Court was not establishing any different test to that set out in s 63(1) of the CP Act nor was it setting a lower threshold for when pleading amendments will be allowed.[3]
[2][2016] VSCA 4.
[3]Ibid [42]-[46].
Victor submits that the test was changed to pick up the real prospects of success as contained in the CPA. He asserts that the Court should look at the allegations in the statement of claim contained in the material facts and accept them at their highest for the purpose of the application. It was further submitted that it is not a summary judgment application.
The plaintiff submit that one consequence of Mandie v Memart Nominees Pty Ltd is that an amendment that might have been permitted previously may now no longer be allowed. As such, the older authorities that preceded the CPA which set out when the pleading amendment will be allowed must be approached with caution.
It is clear from Mandie v Memart Nominees Pty Ltd that it is now more difficult for a party to convince a court that an amendment should be allowed. It must show that there is a real prospect of success. The Court of Appeal has also made it clear that to grant leave in circumstances where the claim or defence has no prospects of success would be futile as the claim or defence would be susceptible to summary judgment. The Court should not leave issues to be re-argued on a summary judgment application if those issues are relevant to whether an amendment should be allowed.
The Pleading
The plaintiff is registered as the legal owner of the Property. Any rights that her parents, Leslie and Georgia, had in the Property are equitable rights. The amended counterclaim pleads that the plaintiff held the Property on trust as to 91% for Leslie and Georgia. Victor argues that, by reason of the Transfer Agreement, the plaintiff now holds the Property on trust for Victor.
Victor submits that there are three methods by which Victor can obtain the rights to the 91% of the Property: an assignment, a declaration of trust, or a direction given to a third party.
The plaintiff submits that any rights Victor may have had under the Transfer Agreement were lost by reason of the orders made by the Family Court on 12 September 2017. The plaintiff says that the rights of Leslie and Georgia were determined by the Family Court in her favour, and accordingly, Victor has no real prospect of success. She submits that Victor’s claims under the Transfer Agreement are subject to res judicata.
Alan James Foster, solicitor for the plaintiff, has filed an affidavit in this matter in which he deposes that he had the primary conduct of the Family Proceeding on behalf of the plaintiff between Georgia as applicant and Leslie as first respondent (by his case guardian, Timothy John Mulvany) and Jeanette as second respondent.
By orders of the Family Court made on 31 July 2018, Johns J released documents including a statement of claim, transcript and proceedings for 12 September 2017 and orders of the Family Court dated 12 September 2017. Mr Foster has produced some of the documents to the Court.
Georgia’s claim against Jeanette was for a declaration that the plaintiff held the Property subject to an equitable trust charge and/or lien in favour of both Leslie and Georgia in proportion to the contributions made to the acquisition and/or maintenance and/or improvement of the Property, together with ancillary orders for sale and distribution of the proceeds as between herself and Leslie. The claim against Jeanette was articulated in a statement of claim filed in the Family Court. Leslie was a respondent to the proceeding and stood to benefit from any orders made in respect of Georgia’s claim.
The claim against Jeanette seeking orders in respect of the Property came on for hearing before the Family Court on 11 and 12 September 2017. Orders dismissing a claim against Jeanette were made to the knowledge of Georgia and Leslie. The claim against Jeanette was dismissed.
Jeanette submits that the effect of the orders was that they would create a res judicata or cause of action estoppel between the plaintiff, Leslie and Georgia as to the existence of a beneficial interest in the Property in favour of Leslie and Georgia. The plaintiff says that there is a final and binding judgment as between herself, Leslie and Georgia regarding any claim of Leslie and Georgia to an equitable interest in the Property to the effect that Leslie and Georgia have no equitable interest.
Victor has conceded, and it was found by Lansdowne AsJ, that at least Leslie and Georgia are bound by the Family Court orders of 12 September 2017.[4]
[4]JD v VD & Ors [2020] VSC 110, [39].
In Tomlinson v Ramsey Food Processing Pty Ltd (‘Tomlinson’),[5] the High Court explained what is known as the ‘privity principle’. French CJ, Bell, Gageler and Keane JJ said:
It is common ground between Mr Tomlinson and Ramsey that the question of whether Mr Tomlinson was privy in interest with the Fair Work Ombudsman for the purpose of issue estoppel is to be determined by reference to the principle governing privity of interest stated and applied in this Court in Ramsay v Pigram. That principle, in the language of Barwick CJ, is that the “basic requirement of a privy in interest is that the privy must claim under or through the person of whom he is said to be a privy”. It is not argued that some wider principle, along the lines of that which has since come to be adopted in the United Kingdom or New Zealand or Canada, should now be adopted in Australia.[6]
[5](2015) 256 CLR 507.
[6]Ibid [17].
The High Court explained how the principle operates as follows:
Consistently with the rationale for the principle, the explanation demonstrates that a party to a later proceeding (A) can be privy in interest with a party to an earlier proceeding (B) on either of two bases. One basis is that A might have had some legal interest in the outcome of the earlier proceeding which was represented by B, or that B has some legal interest in the outcome of the later proceeding which is represented by A. The extent to which the representation by A or B will be sufficient to bind the other is the critical issue which will be explored later in these reasons. The other basis is that, after that earlier proceeding was concluded by judgment, A might have acquired from B some legal interest in respect of which B would be affected by an estoppel which A then relies on in the later proceeding.[7]
[7]Ibid [33].
The plaintiff relies upon the ‘privity principle’ as explained in Tomlinson. She states that Victor, as an unknown assignee of an interest pursuant to the Transfer Agreement, was a person whose claim could only arise under or through Leslie and Georgia as at September 2017.
In Commissioner of State Revenue v Mondous,[8] McLeish J, with whom McDonald AJA agreed, held that a beneficiary of a fixed trust is a privy in interest for the purpose of res judicata. Here, if a bare trust was created in November 1988 and continued until December 2017, Victor would have lost his rights by reason of res judicata. The Family Law proceeding has determined any claim of Leslie and Georgia to an equitable interest in the Property. Leslie and Georgia have no claim against the plaintiff and as Victor’s claim against the plaintiff is through Leslie and Georgia, he too has no claim.
[8][2018] VSCA 185.
In my view, in these circumstances, Victor has no reasonable prospect of success and the amendment to the pleading should not be allowed.
There are other issues raised by the plaintiff in opposition to the pleading.
Victor deposes that in or around July 2018, the Transfer Agreement was discovered by him and his mother when they were sorting through his father’s items in his parents’ garage at their house at 9 Gordon Street, Tullamarine. The Transfer Agreement was found in a bundle of documents belonging to his father. The Transfer Agreement that was found is only a copy.
An assignment of an equitable chose in action, to be effective, requires the giving of a notice by the assignor to the assignee.[9] For the assignment to be effective, notice of the assignment must have been given by Leslie and Georgia to Victor. There is no evidence of any communication by Leslie to Victor, or by Georgia to Victor, of any intention that the Transfer Agreement would ever take effect.
[9]See J. G. Starke, Assignment of Choses in Action in Australia (Butterworths, 1972) [22].
No explanation has been provided to the Court as to why Victor was going through Leslie’s documents. At that time, Leslie was the subject of a guardianship order and an administration order made by VCAT by which Malcolm Hastings, solicitor, was appointed as the administrator of the estate of Leslie on 7 November 2014.
Mr Hastings has made a statement, exhibited to one of Mr Foster’s affidavits, in which he states that:
The case guardian is unable to take a position in respect of Mrs Drew’s claim against Jeanette asserting an interest in Mangalore Street …
In the event Mrs Drew succeeds with her claim and the court determines Mr and Mrs Drew have an equitable interest in Mangalore Street, and the case guardian seeks orders providing for an adjustment of that interest, along with Mr and Mrs Drew’s other legal interest in property, so that Mr Drew receives total property with a net value equivalent to 60% of Mr and Mrs Drew’s combined legal and equitable interests in property.
The plaintiff submits that at the time Victor alleges he found the Transfer Agreement, the document was property under the control of Mr Hastings. She submits that Victor’s evidence is directly to the contrary to support a proposition that the Transfer Agreement was ever intended to take effect, or that a copy of it or notice was ever given to Victor of the existence of it.
Mr Foster deposes that Jeanette informed him that until he provided her with a copy of the purported Transfer Agreement, that she had never seen it and had never been informed by her father or mother or any person of its existence. He is informed by Jeanette, and believes that she corresponded in writing with Leslie on many occasions from about 1995 until the time of his death in October 2019, and also spoke with him on many occasions. Leslie never, on any occasion, asserted to Jeanette that his asserted interest in the Property was held by her for or on behalf of Victor.
Mr Foster has also exhibited to an affidavit a considerable number of documents which he deposes were apparently prepared by Leslie, reflecting Leslie’s instructions to legal representatives and accountants for both the period before November 2000 and after 2000, in which Leslie asserted some type of ownership right in the Property. Mr Foster deposes that in none of those documents is there a suggestion that either before or after 2000, Leslie considered that the plaintiff held any interest of his in trust for Victor and in fact the documents are strongly to the contrary.
The plaintiff submits that the only basis put to the Court upon which Victor became aware of the purported assignment was by finding a copy of the Transfer Agreement in his father’s records when he was going through them with his mother. It is submitted that this would provide an obvious foundation for the proposition that there is no completion of any assignment.
There are other documents upon which the plaintiff relies which do not give any hint of any assignment of the Property to Victor. There is what appears to be a letter or a note written by Leslie to Georgia in October 1995. It seems to be dealing with a division of assets or division of a partial dealing of affairs between Leslie and Georgia on an ongoing basis:
With regard to 1 Mangalore Street. I suggest we sell it for $205,000.00 to $210,000.00 and the proceeds be used to pay back approximately $185,000.00 to us which will be split up 50\50. The other monies being used to repay Victor, Jeanette and Angelique for money they put in when we purchased 1 Mangalore Street.
There is then a letter sent by Leslie to Jeanette and Family on 17 February 2005. It states:
. . . The next thing is 1 Mangalore Street. As you are aware, the house was bought to provide a place for any of you kids to start your married lives. I paid the majority and topped it up with Trust Accounts I had in each of your names. I have enclosed a list of each ones equity in the property. These monies started of (sic) with an initial gift from my Father to each one of you when you were born. Over the years the accounts have grown with further gifts from him, myself and other ways. As you can see, the house cost me approximately $214,000.00 including legal fees. I paid cash for the house but took out a $180,000.00 loan on the factory. The first three years I was paying approximately $1,800.00 per month interest only. For the next three years I paid approximately $1,260 per month only. At least I got the benefit of claiming the payments as a deduction.
… It will be difficult to live next door to Vic but I am prepared to do the same for you as we did for Vic, namely giving you $200,000.00 towards you buying a house. If it comes to the worse, even paying of (sic) the house in Perth. I would like to think that both you kids and partners could pay your own way.
On 17 December 2007, Leslie sent a letter to Jeanette and Family, stating:
… This brings me to our position in regard to Mangalore Street. As you are aware it is sitting there empty and I am constantly paying Rates and Insurance. Just three weeks ago a truck knocked down the side fence, It was lucky that I happened to be out front talking with Vic when we saw it happen. The Insurance Company will attend to whatever action needs to be done. I am once again asking you to sign the Power of Attorney to sell the place and pay out you three kids and myself and get on with life.
In a file note dated 16 August 2005 from the records of Leslie’s solicitors, Pearce Webster Dugdales, there is no mention of any transfer or assignment of Leslie or Georgia’s interest to Victor in that document. Interestingly, it does state that Leslie wanted the house sold, or at least an acknowledgment from his daughter, Jeanette, that it is not her house.
From those documents, there was no intention on the part of Leslie to give notice to Victor of the alleged assignment. As there is no evidence of any assignment, and that the documentary evidence makes no reference whatsoever to any interest Victor had arising under this Transfer Agreement, it would appear that the assignment cannot be effective. There is no real prospect of success.
The amendments will not be allowed.
SCHEDULE OF PARTIES
S CI 2017 04815
JEANETTE DREW Plaintiff - and - VICTOR DREW First Defendant HELEN DREW (also known as HELEN KARRAS) Second Defendant VICTOR DREW Plaintiff by Counterclaim - and - JEANETTE DREW First Defendant by Counterclaim GEORGIA DREW Second Defendant by Counterclaim TIMOTHY JOHN MULVANY as Litigation Guardian for LESLIE VICTOR DREW Third Defendant by Counterclaim ANGELIQUE LESLIE DREW Fourth Defendant by Counterclaim
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