Goldberg v Campbell & Shaw

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

PROPERTY LIST

S ECI 2021 02523

BRIAN MORRIS GOLDBERG (WHO SUES AS EXECUTOR OF THE ESTATE OF ALEXANDER JOSEPH MCCOLLEY (ALSO KNOWN AS ALEXANDER JOHN MCCOLLEY))	Plaintiff
v
CAMPBELL AND SHAW (A FIRM)	First Defendant
NORMAN LESLIE MATHERS	Second Defendant

---

JUDGE:	Randall AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	13 December 2021
DATE OF RULING:	3 February 2022
CASE MAY BE CITED AS:	Goldberg v Campbell & Shaw
MEDIUM NEUTRAL CITATION:	[2022] VSC 24

---

REAL PROPERTY – Caveats – Application for leave to amend a caveat – Section 90(3) of the Transfer of Land Act 1958 (Vic) – Considerations for leave to amend a caveat – Nature of the amendment sought – Circumstances in which the error was made – The Court should not readily act in a way which might encourage the belief that caveats can be imprecisely formulated and later amended – Merits of the claim for the caveatable interest sought by the amendment – Whether there is a prima facie case of proprietary estoppel – Whether co-owners are required to pay rent to each other – Detrimental reliance.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R Antill	Casey Business Lawyers
For the Second Defendant	Mr P Reynolds	Campbell & Shaw
No appearances on behalf of the First Defendant

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Background......................................................................................................................................... 1

Issues.................................................................................................................................................... 5

Relevant statutory provisions.......................................................................................................... 5

Power to amend caveats.................................................................................................................... 5

Considerations for amending a caveat........................................................................................... 7

Nature of the amendment............................................................................................................ 8
Circumstances in which the error was made............................................................................ 8
The second defendant’s position....................................................................................... 8
The plaintiff’s position...................................................................................................... 10
Consideration..................................................................................................................... 11

The Court should not readily act in a way which might encourage the belief that caveats can be imprecisely formulated and then amended.................................................................. 14
Merits of the claim for the caveatable interest sought by the amendment to the Caveat 15
The second defendant’s position..................................................................................... 15
The plaintiff’s position...................................................................................................... 18
The second defendant’s position in reply...................................................................... 25
Consideration..................................................................................................................... 30
Prima facie case..................................................................................................... 31
Balance of convenience........................................................................................ 40

Conclusion......................................................................................................................................... 41

Orders................................................................................................................................................. 41

HIS HONOUR:

Introduction

This is an application by Norman Leslie Mathers, the second defendant, for leave to amend caveat number AN634457G (‘the Caveat’) registered upon Certificate of Title Volume 9299 Folio 729 (‘the Property’), pursuant to s 90(3) of the Transfer of Land Act 1958 (Vic) (‘the Act’) by summons filed on 22 October 2021. The second defendant seeks the following amendments, each in the alternative:

(a) substituting ‘constructive trust arising from the doctrine of proprietary estoppel’ for ‘AGREEMENT WITH THE FOLLOWING PARTIES AND DATE’ as the grounds of claim;

(b) substituting ‘implied, resulting or constructive trust’ for ‘AGREEMENT WITH THE FOLLOWING PARTIES AND DATE’ as the grounds of claim; or

(c) substituting ‘estoppel’ for ‘AGREEMENT WITH THE FOLLOWING PARTIES AND DATE’ as the grounds of claim.

In support of his application, the second defendant relied upon: his written submissions filed on 15 November 2021; his written submissions in reply filed on 30 November 2021; and his affidavit sworn on 22 October 2021 and accompanying affidavits. In these submissions and affidavits, the second defendant also referred to his written submissions filed on 27 August 2021 and his affidavits sworn on 13 August 2021 and 1 September 2021 and accompanying affidavits.

In opposition to the second defendant’s application, the plaintiff relied upon: his written submissions filed on 30 November 2021; his affidavit sworn on 5 November 2021 and accompanying exhibits; and the affidavits of Marylyn Gilberthorpe sworn on 18 July 2021 and 18 August 2021 and accompanying affidavits.

Background

The second defendant’s mother passed away on 10 November 2004, leaving all her chattels to her partner, Alexander Joseph McColley (also known as Alexander John McColley) (‘the Deceased’), and the residue of her estate, which included the Property, to the Deceased and to her son, the second defendant, equally as tenants in common.

The Property was purchased by the second defendant’s mother on 22 October 1979 as a vacant block of land. Over the next 12 months, the second defendant’s mother and the Deceased paid for the house to be built and, afterwards, they lived together at the Property as their matrimonial home. The second defendant never lived at the Property.

After the second defendant’s mother passed away, the Deceased continued to live at the Property.

On 29 March 2005, the second defendant and the Deceased entered into a deed of arrangement (‘DOA’), which had the following terms:

1.Alex [the Deceased] is permitted to reside at the Property rent free for the term of his life on until he permanently vacates the property.
2.During this period of residency Alex will be responsible for the payment of all outgoings including rates, taxes and insurance premiums and will maintain the property in its present condition.
3.Alex will execute a Will in which he will devise to Norman [the second defendant] his one-half interest in the property.

The Deceased continued to live in the Property rent-free until August 2016, when he was admitted into a nursing home. The Deceased never returned to the Property after that. Since August 2016, the second defendant had attended to the payment of rates and other outgoings of the Property.

In 2008, the Deceased asked the plaintiff, Brian Morris Goldberg, to be his attorney as he was having difficulty with his finances. On 18 February 2008, the Deceased’s last will was executed, which provided that after the payment of the usual debts, expenses, duties and taxes, the residuary of his estate was to be left to the plaintiff.

In October 2016, the Property was put up for auction by the plaintiff as the Deceased’s attorney without the second defendant’s consent.

On 10 March 2017, the Registrar of Titles processed the Caveat lodged by the second defendant’s former solicitors, Lempriere Legal, on the title to the Property upon the second defendant’s instructions. The Caveat is in the following form on the title search of the Property:

Caveator
NORMAN LESLIE MATHERS
Grounds of Claim
AGREEMENT WITH THE FOLLOWING PARTIES AND DATE
Parties
ALEXANDER JOHN MCCOLLEY
Date
05/08/2016
Estate or Interest
FREEHOLD ESTATE
Prohibition
ABSOLUTELY
Lodged by
LEMPRIERE LEGAL
Notices to
LEMPRIERE LEGAL of CENTRE COURT ARCADE 4/156 MAIN STREET PAKENHAM VIC 3810

In 2017, the plaintiff, in his capacity as the executor of the Deceased’s estate, made an application to the Victorian Civil and Administrative Tribunal (‘VCAT’) seeking to have the Property sold (‘the first VCAT proceeding’). The application was dismissed on 21 September 2017.[1]
[1]McColley v Mathers (Building and Property) [2017] VCAT 1529 (‘McColley v Mathers’).

In 2019, the second defendant made an application to VCAT seeking to have the half share of the Property held by the Deceased transferred to himself (‘the second VCAT proceeding’). The application was dismissed on 21 August 2019.[2]
[2]Mathers v McColley (Building and Property) [2019] VCAT 1230 (‘Mathers v McColley’).

On 7 December 2019, the Deceased passed away. On 7 October 2020, the Registrar of Probates ordered that probate of the will of the Deceased be granted to the plaintiff.

At the date of his death, the Deceased and the second defendant were the registered proprietors of the Property as tenants in common in equal shares. The Deceased’s half interest in the Property is the only significant asset in the Deceased’s estate.

On 19 March 2021, the Deceased’s daughter filed an originating motion in this Court in a different proceeding, in which she sought provision from the Deceased’s estate pursuant to the provisions of Part IV of the Administration and Probate Act 1958 (Vic) (‘the Part IV proceeding’).

By originating motion filed on 19 July 2021 in this proceeding, the plaintiff, in his capacity as the executor of the estate of the Deceased, sought, amongst other things, an order for the removal of the Caveat from the title to the Property pursuant to s 90(3) of the Act.

The application for the removal of the Caveat was heard and determined by Matthews AsJ. By judgment delivered on 8 October 2021, her Honour determined that the Caveat is to be removed from the title to the Property; however, the order for the removal was to be stayed for a period of time to allow time for the second defendant to make an application to amend the Caveat.[3]
[3]Goldberg v Campbell & Shaw [2021] VSC 647.

On 22 October 2021, the second defendant filed a summons for leave to amend the grounds of claim of the Caveat pursuant to s 90(3) of the Act.

On 29 October 2021, Matthews AsJ made orders listing the hearing of the second defendant’s application before another Associate Judge, after the plaintiff raised the possibility of an application being made that her Honour recuse herself for apprehended bias as a result of certain statements made by her Honour in her judgment delivered on 8 October 2021. Those statements included her Honour’s statement that it was ‘highly likely’ that the second defendant has a prima facie case to a freehold estate on the grounds of a constructive trust arising from the doctrine of proprietary estoppel.[4]
[4]Ibid [44].

The second defendant’s application for leave to amend the grounds of claim of the Caveat was subsequently heard by me on 13 December 2021.

Issues

In determining the second defendant’s application, the issues are:

(a) whether leave should be granted to amend the grounds of claim of the Caveat; and

(b) if leave should be granted, how should the grounds of claim be amended.

Relevant statutory provisions

Section 90(3) of the Act states:

Any 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.

Power to amend caveats

Although not raised by the parties, I find it appropriate to consider whether the Court has power to amend a caveat pursuant to s 90(3) of the Act. In Percy & Michele Pty Ltd v Gangemi (‘Percy v Gangemi’),[5] Macaulay J observed:

The picture presented by the authorities on whether or not an amendment may be made to a caveat, upon an application for removal of the caveat, is not entirely consistent.
The power to amend a caveat has been derived from the discretionary power contained in s 90(3), or its equivalents in other jurisdictions, for the court to ‘make such order as the court thinks fit’. That power has been recognised in various cases to be broad enough to permit an amendment to a caveat.
In Midwarren Estates Pty Ltd v Retek & Stivic Menhennitt J distinguished between a power in the court to make an amendment to the scope of the protection given by a caveat, on the one hand, and, on the other, an amendment to the estate claimed in the caveat. His Honour was of the view that the authorities recognising a power to amend only recognised a power of the former type, and not the latter. His Honour did not consider that the provisions of s 90(3) of the Transfer of Land Act authorised the making of an amendment to the estate claimed. And, although he was cautious not to be taken as deciding there may not be some inherent power to do so, his Honour nonetheless expressed his own opinion that there was no other inherent power to authorise an amendment which would result in the substitution of an entirely inconsistent estate or interest. Even if there was such a power, and because the amendment was strongly opposed, his Honour was further of the view that because what was sought to be done was so different from, and inconsistent with, what was originally claimed he would not, as a matter of discretion, grant the amendment.
Mr Gangemi prefers to rely on what Gillard J said in S & D International Pty Ltd (in liq) v Malhotra. However it is plain that in that case Gillard J was not dealing with the amendment of an estate or interest claimed, but rather the grounds upon which that estate or interest was claimed. It is not therefore inconsistent with the decision in Midwarren Estates.[6]

[5][2010] VSC 530 (‘Percy v Gangemi’).

[6]Ibid [92]–[95] (citations omitted).

Macaulay J then went on to discuss whether the s 90(3) of the Act empowered the Court to amend a caveat by substituting an entirely different estate or interest claimed. Although Macaulay J was of the view that that there was ‘force in the argument’[7] that the Court does not have such a power, his Honour ultimately stated:[8]

Having referred to these authorities, and canvassed these views, I do nonetheless recognise that the power expressed in s 90(3) is wide and unqualified. Ultimately, the better view may be that although the power is to be construed as being wide enough to amend the estate or interest claimed, in appropriate circumstances, nevertheless when exercising its discretion the court should generally be less inclined to amend the interest or estate claimed than to amend the grounds of the claim or the scope of the protection asserted.
I do not find it necessary to resolve that issue. As Menhennitt J did in Midwarren Estates, I am able to decide this question by addressing whether, even if the power exists, I would exercise my discretion to allow an amendment to the estate claimed.

[7]Ibid [96].

[8]Ibid [101]–[102].

In the present case, the second defendant is not seeking to amend the estate or interest claimed in the Caveat, only the grounds of claim. In S&D International Pty Ltd (in liq) v Malhotra,[9] Gillard J was prepared to grant leave to amend the grounds of claim of the caveat in question in circumstances where the grounds of claim were incorrectly stated.[10] Accordingly, I am satisfied that the Court has power to amend the grounds of claim of a caveat. In the circumstances, I am not required to determine whether the Court has power to amend the estate or interest claimed in a caveat.
[9][2006] VSC 280.
[10]Ibid [16].

Considerations for amending a caveat

In Percy v Gangemi,[11] Macaulay J considered the factors that are to be taken into account in the exercise of the discretion to allow an amendment to a caveat. His Honour stated:[12]

So what are the factors which should be taken into account in the exercise of discretion? As I say, the first and a powerful one, is the fact that the amendment sought is to the interest claimed and not just the grounds of claim or the scope of the protection. Secondly, I have regard to the circumstances in which the error was made. … Next I am of the view that the court should not readily act in a way which might encourage the belief that caveats can be imprecisely formulated and then ‘fixed up later’. As has been pointed out, caveats act as an interlocutory injunction (albeit by an administrative act) and can have powerful and serious consequences. Wrongly formulated caveats should not easily be tolerated.
Finally, of course, the court should have regard to the overall merits of the claim for a caveatable interest of the kind which is sought by the amendment. In other words, it should have regard to all of the same considerations which arise on the application of removal for a caveat in the terms sought. …

[11][2010] VSC 530.

[12]Ibid [104]–[105].

In his submissions for leave to amend the Caveat, the second defendant referred to the factors identified by Macaulay J in Percy v Gangemi as follows:

(a) the nature of the amendment;

(b) the circumstances in which the error was made;

(c) the principle that the Court ‘should not readily act in a way which might encourage the belief that caveats can be imprecisely formulated and then “fixed up later”’;[13] and

(d) the overall merits of the claim for a caveatable interest as sought by the amendment, which refers to the same considerations which arise on an application for the removal of a caveat in the terms sought.

[13]Ibid [104].

I adopt these factors considered by Macaulay J in determining whether to grant leave to amend the Caveat.

Nature of the amendment

As stated above, the second defendant does not seek to amend the estate or interest claimed in the Caveat, but only the grounds of claim. The second defendant maintains his claim for a freehold estate in the Property for the half share which the plaintiff currently holds as the registered proprietor as the executor of the Deceased’s will, but seeks to amend the grounds of claim of such an interest. Accordingly, I consider that this favours the second defendant in his application for leave to amend the Caveat.

Circumstances in which the error was made
The second defendant’s position

The second defendant contended that the error relating to the grounds of claim of the Caveat is a technical error, which is having the DOA as a vehicle for a promise as the grounds of claim. The second defendant contended that he can be reasonably excused for the error and leave ought to be granted to amend the Caveat. At the hearing, counsel for the second defendant submitted that the first basis for which leave ought to be granted is the inherent difficulty in formulating the grounds of claim of the Caveat. When the second defendant’s mother passed away in 2004, she left the Property to the Deceased and the second defendant equally. The Deceased and the second defendant subsequently entered into the DOA on 29 March 2005, pursuant to which the Deceased promised to leave his half share in the Property to the second defendant in his will. The second defendant contended that if the DOA had contained a promise to transfer the Deceased’s share in the Property to the second defendant, the promise would become due upon the Deceased’s death and there would be no question that such a promise would be specifically enforceable and that it would give rise to a constructive trust in the second defendant’s favour, like an ordinary contract of sale. However, in this proceeding, the second defendant contended that the promise in the DOA was that the Deceased would leave the second defendant his half share in the Property in his will, and that the promise supports a proprietary interest based on the doctrine of proprietary estoppel. The second defendant contended that the distinction is a very fine one — that the DOA itself does not give rise to a proprietary interest, only a promise.

The second defendant contended that he permitted the Deceased to reside in the Property rent-free in accordance with cl 1 of the DOA. When the Property was put up for auction without the second defendant’s consent in October 2016, the second defendant understood at the time that the entire Property belonged to the second defendant pursuant to the DOA because the Deceased had permanently vacated the Property in August 2016. The second defendant contended that this can be inferred to be in accordance with the legal advice he received from his former solicitors, although the second defendant now accepted that this was incorrect. In March 2017, the second defendant instructed his former solicitors to lodge the Caveat over the Property. Although the Caveat refers to the date of 5 August 2016, the second defendant contended that he did not remember who suggested that date but he may have mentioned that date because that is when the Deceased permanently vacated the Property. The second defendant contended that he now understood that the date stated in the Caveat ought to be the date of the DOA and not the date that his interest under the DOA crystallised, and the second defendant contended that it can be inferred that he was acting on advice in putting that date in the Caveat.

The second defendant also contended that in the first VCAT proceeding and the second VCAT proceeding (together, ‘the VCAT proceedings’), Senior Member Vassie did not mention the doctrine of proprietary estoppel in his reasons.[14] At the hearing, counsel for the second defendant submitted that while this is not a criticism of VCAT for failing to consider what was not put before it, it is another example of someone not turning their minds and considering the existence of a proprietary interest based on proprietary estoppel. Further, the second defendant contended that the Deceased did not challenge the authenticity or validity of the DOA in the VCAT proceedings.
[14]McColley v Mathers [2017] VCAT 1529; Mathers v McColley [2019] VCAT 1230.

The second defendant contended that his belief that the DOA gave him a proprietary interest in the Property was not unreasonable because:

It was the position in Australia from 1972, when Schaefer v Schuhmann was decided, which was a decision of the Privy Council on appeal from the NSW Supreme Court.[15] Although in Barns v Barns, the High Court, by majority, did not follow Schaefer v Schuhmann, Callinan J, who dissented, endorsed it.[16] Finally, Senior Member Vassie appeared to endorse Schaefer v Schuhmann, stating incorrectly that Gleeson CJ had quoted it with approval.[17] In fact, Gleeson CJ was quoting Lord Cross of Chelsea’s speech as representing the majority in Schaefer v Schuhmann,[18] but his Honour preferred the dissent of Lord Simon of Glaisdale.[19]
[15][1972] AC 572.
[16]See especially Barns v Barns (2003) 214 CLR 169, 224 [161]–[162], 226 [165].
[17]Mathers v McColley [2019] VCAT 1230, [14].
[18]Barns v Barns (2003) 214 CLR 169, 181–2 [25]–[27].
[19]Barns v Barns (2003) 214 CLR 169, 184–5 [34].

The plaintiff’s position

The plaintiff contended that the second defendant’s evidence and submissions contain irrelevant material, admissions that the second defendant’s former solicitors made erroneous statements, and admissions that the second defendant held incorrect beliefs, and that the second defendant relied upon inferences about the advice the second defendant’s former solicitors gave him. The plaintiff contended that there was no evidence from the second defendant’s former solicitors about the actual advice they gave him or the reasons for the advice, nor was there evidence explaining the lack of evidence from the second defendant’s former solicitors.

The plaintiff further contended that, in submitting that the decisions of the VCAT proceedings did not mention the doctrine of proprietary estoppel, the second defendant was trying to shift the blame to Senior Member Vassie for failing to provide comprehensive legal advice to the second defendant. The plaintiff contended that Senior Member Vassie had stated that the second defendant had no basis to claim that he had a freehold estate at the time of the first VCAT proceeding,[20] and that any interest the second defendant might acquire in the future (after the second VCAT proceeding) was subject to various contingencies.[21] The plaintiff contended that there was no explanation as to why the second defendant did not withdraw the Caveat, lodge a new caveat or seek his own legal advice about how the Caveat could be amended, and that there was an inexcusable delay in bringing this application.
[20]McColley v Mathers [2017] VCAT 1529, [15].
[21]Mathers v McColley [2019] VCAT 1230, [11].

Consideration

In the first VCAT proceeding, Senior Member Vassie found that the second defendant had no claim at that time to a freehold estate in the Deceased’s half share in the Property as claimed in the Caveat. However, Senior Member Vassie also found that the second defendant gained ‘a right to an equitable remedy against a threatened disposition of [the Deceased’s] half interest in the land which would put it out of his power to devise it by will’[22] under the DOA and noted that ‘[p]recisely how the right should be classified is not clear’.[23] It is clear that Senior Member Vassie considered that the DOA provided some kind of right to the second defendant. Although VCAT only determines issues that are put before it and it is not the role of VCAT to provide legal advice, I accept that it was reasonable for the second defendant to understand that the DOA was the basis of the caveatable interest claimed in the Caveat, particularly when I note the second defendant’s submission that it is a fine distinction between the DOA being the source of the proprietary interest and the DOA containing a promise of the proprietary interest by reason of a constructive trust arising from proprietary estoppel. This is notwithstanding that Senior Member Vassie had found that the second defendant had no freehold estate at the time of the first VCAT proceeding.
[22]McColley v Mathers [2017] VCAT 1529, [21].
[23]Ibid.

The plaintiff contended that the second defendant ought to have sought legal advice after the VCAT proceedings about how the Caveat could be amended. From the evidence before the Court, it appears that the second defendant was represented by Lempriere Legal from time to time from 2016 until around April 2020,[24] and then by Campbell and Shaw thereafter (Campbell and Shaw advised the plaintiff’s solicitors, by letter dated 23 April 2020, that the second defendant’s former solicitors had ceased acting and that the second defendant was now instructing Campbell and Shaw). At the hearing, counsel for the second defendant confirmed that the second defendant had legal advice at all times. Although the content of legal advice is not in evidence before the Court, at the hearing, counsel for the second defendant submitted that the legal advice was unable to grasp the distinction between a proprietary interest based on the DOA and a proprietary interest based on a promise in the DOA. Counsel for the second defendant submitted that the second defendant should not have to suffer now due to the failure of his legal advisors to observe that distinction. In any event, neither the plaintiff (under a power of attorney for the Deceased)[25] nor the second defendant made an application to remove the Caveat or to amend the Caveat, as the case may be, immediately after each of the VCAT proceedings. While it is the caveator who has the onus in proving their caveatable interest, it is surprising that the plaintiff did not make an application to remove the Caveat after the VCAT proceedings.
[24]Although I note that the second defendant represented himself at the hearings of the VCAT proceedings. See McColley v Mathers [2017] VCAT 1529; Mathers v McColley [2019] VCAT 1230.
[25]Although I note that I was not taken to the provisions of the power of attorney.

Although the plaintiff contended that the second defendant had not adduced sufficient evidence in relation to the advice provided by his former solicitors regarding the grounds of claim of the Caveat, I am satisfied that such evidence can be inferred from the Caveat lodged on the title to the Property. Unlike the caveator in Percy v Gangemi who lodged the caveat himself despite being represented by lawyers at all relevant times,[26] in this proceeding, the second defendant’s former solicitors lodged the Caveat on his behalf. I do not find it unreasonable to infer that the second defendant’s former solicitors had advised the second defendant that he had a freehold estate in the Property arising from the DOA.
[26]Percy v Gangemi [2010] VSC 530, [104].

Communications between lawyers and their clients pertaining to legal advice are protected by legal professional privilege; however, such privilege can be waived.[27] Waiver may be express or implied and occurs when there is conduct by the client that is inconsistent with the maintenance of confidentiality.[28] Whether there is any such inconsistency depends on the context and circumstances of the case, including any fairness considerations.[29] Although there was extensive reference to legal advice during submissions, the reference in evidence was limited. In his affidavit sworn on 22 October 2021, the second defendant deposed that his former solicitors ‘advised [him] to lodge a caveat to protect [his] interest in the Property’. It is unlikely that the second defendant had waived privilege by that disclosure, given that the advice of his former solicitors was likely disclosed as evidence as to how the Caveat came to be lodged and the disclosure does not specify the grounds for the Caveat or the substance of the advice.[30] Accordingly, the second defendant was not required to produce any communications between him and his former solicitors. However, I am entitled to consider that the second defendant acted in accordance with legal advice when he had legal representation at all relevant times, notwithstanding that he was not legally represented in the VCAT proceedings.
[27]Mann v Carnell (1999) 201 CLR 1, 13 [28]–[29] (Gleeson CJ, Gaudron, Gummow and Callinan JJ).
[28]Ibid.
[29]Osland v Secretary, Department of Justice (2008) 234 CLR 275, 297 [45] (Gleeson CJ, Gummow, Heydon and Kiefel JJ).
[30]In Osland v Secretary, Department of Justice (2008) 234 CLR 275, 298 [48], the majority of the High Court found that there was no waiver of privilege by the Attorney-General regarding legal advice referred to in a press release with respect to his denial of a petition because the purpose of the press release was to satisfy the public that due process had been followed and the Attorney-General did not give reasons for his decision.

I am satisfied that the circumstances of the error in the grounds of claim of the Caveat favours neither the second defendant nor the plaintiff given the inaction of both parties after the VCAT proceedings.

The Court should not readily act in a way which might encourage the belief that caveats can be imprecisely formulated and then amended

With respect to the factor of the Court not acting in a way which might encourage the belief that caveats can be imprecisely formulated and then amended, the second defendant primarily referred to his submissions raised in relation to the circumstances in which the error was made. The second defendant contended that the error in stating the grounds of claim of the Caveat was not the result of carelessness on his or his solicitors’ part, but due to a real difficulty in stating the true grounds of claim. The second defendant contended that it is a fine distinction between the DOA not being the grounds of claim and the DOA containing a promise that is the grounds of his claim. At the hearing, counsel for the second defendant submitted that prior to Barns v Barns (‘Barns’),[31] the position was that agreements to devise property in a will could give rise to a proprietary interest. Counsel for the second defendant submitted that, in Barns,[32] Gleeson CJ discussed one line of cases which says that property that was promised to be given in a will does not fall into the estate for the purposes of Part IV legislation, and another line of cases, which is followed, which says that it does. Accordingly, the second defendant contended that it is hardly an unreasonable legal position to maintain even if it turned out to be wrong.
[31](2003) 214 CLR 169 (‘Barns’).
[32]Ibid 181–2.

The second defendant contended that refusing the second defendant leave to amend the Caveat would have powerful and serious consequences if the second defendant were to succeed on the grounds of proprietary estoppel on a later application, as it would allow the plaintiff to deny the second defendant’s interest in the Property on a subtle distinction.

The plaintiff also relied upon his submissions in relation to the circumstances of the error in the Caveat. The plaintiff contended that the second defendant was told by VCAT back in 2017 that the Caveat was defective and that he did nothing about the Caveat from 2017 until 22 October 2021.

As I have stated above with respect to the circumstances in which the error was made, I note the second defendant’s submissions that it is a fine distinction between the DOA not being the grounds of claim and the DOA containing a promise that is the grounds of claim underlying the Caveat. Given that the amendment sought is merely to the grounds of claim of the Caveat and not the estate or interest claimed, I do not find that it irreparably detracts from the principle that caveats should not be imprecisely formulated and then subsequently amended. Although wrongly formulated caveats should not be easily tolerated, I am of the view that the amendment sought will simply clarify the basis of the freehold estate claimed in the Caveat.

While VCAT did find that there was no basis for the freehold estate claimed by the second defendant in the Caveat in 2017, as discussed above, neither the plaintiff (under a power of attorney for the Deceased) nor the second defendant made an application to remove the Caveat or to amend the Caveat, as the case may be, after the first VCAT proceeding.

In the circumstances, I do not find that the principle that caveats should not be imprecisely formulated and subsequently amended to be an impediment to granting leave to amend the grounds of claim of the Caveat in this proceeding.

Merits of the claim for the caveatable interest sought by the amendment to the Caveat
The second defendant’s position

The second defendant contended that he has a strong prima facie proprietary estoppel claim as follows:

(a) by executing the DOA, the Deceased represented to the second defendant that, if he let him reside in the Property rent-free, he would leave his half share in the Property to him in his will (‘the Representation’);

(b) the second defendant acted in reliance on the Representation by letting the Deceased reside at the Property rent-free and not applying for the Property to be sold and the proceeds divided;

(c) by making a will inconsistent with the Representation, the Deceased sought to depart from his Representation;

(d) if the Deceased (by his executor, the plaintiff) were permitted to depart from the Representation, the second defendant would suffer the detriment of losing the half interest in the Property promised to him and not getting the Property transferred into his name when he had let the Deceased live in the Property for many years and gave up a valuable right; and

(e) in those circumstances, it would be unconscionable to permit the Deceased to do so.

The second defendant contended that there was no occasion to depart from the prima facie position that the Deceased is to be kept to his promise by the imposition of a constructive trust. The plaintiff is a volunteer under the will, and equity will not assist a volunteer. The second defendant contended that the same may be said for any person who sought to make a Part IV claim against the Deceased’s estate.

The second defendant contended in written submissions that the constructive trust ought to be treated as coming into existence when the second defendant relied on the promise to his detriment, namely, when the second defendant permitted the Deceased to live in the Property rent-free in 2005 until he permanently vacated the Property, or at least when the Deceased took up residence in the Property consistently with that promise. The second defendant contended that McNab v Graham (‘McNab’)[33] held that, when the Court imposes a constructive trust based on proprietary estoppel, the constructive trust arises when the promisee acts in reliance on the representation. The second defendant contended that the active reliance started in 2005 when the second defendant let the Deceased live at the Property and it continued right up until his death or until he permanently vacated the Property. The second defendant contended that, at the time, he could have lived in the Property or sought an order for the sale and division of the proceeds of sale. However, the second defendant did not do so and waited 11 years for the Deceased to move out and then until the Deceased passed away. The second defendant contended that, therefore, a constructive trust attached to the Deceased’s interest in the Property and he was not the beneficial owner of it at the time that he passed away. As a result, when the Deceased passed away, his interest in the Property did not form part of his estate. The second defendant contended that the Deceased’s interest in the Property never falls to be administered in accordance with the will or to be administered in a Part IV claim.
[33](2017) 53 VR 311 (‘McNab’).

The second defendant contended that the strength of his claim is a strong reason why the amendment of the Caveat should be allowed, particularly if the second defendant has a strong prima facie case. At the hearing, counsel for the second defendant submitted that the Court does not necessarily need to be satisfied that it is a prima facie claim, but counsel for the second defendant submitted that it is a strong claim.

At the hearing, counsel for the second defendant submitted that, as co-owners, the second defendant and the Deceased could have lived together and the second defendant would not be entitled to charge rent to the Deceased. If the arrangement was for the Deceased to live at the Property all by himself and not the second defendant, counsel for the second defendant submitted that one might think that in consideration of that promise, the second defendant would get something out of it, in this case — rent. Counsel for the second defendant submitted that, by contrast, the DOA allowed for the Deceased to live in the Property rent-free until he permanently vacated the Property, which was part of the valuable consideration provided by the second defendant. Counsel for the second defendant submitted that the second defendant was not entitled to just say ‘you have to pay rent’, but in the context of the relationship and the DOA where only the Deceased was allowed to live at the Property even though both of the Deceased and the second defendant were allowed to live there rent-free. Counsel for the second defendant submitted that it is notable that the Deceased did not have to pay for the valuable thing that he got.

Further, the second defendant contended that the plaintiff had now filed material that appeared to challenge the validity of the DOA for the first time. The second defendant contended that that evidence ought to be received with utmost caution because the Deceased is no longer alive to speak for himself and because there were no such allegations made in the VCAT proceedings, while the Deceased was alive, and where the parties proceeded on the basis that the DOA was valid. The second defendant contended that issue estoppel arises to prevent the plaintiff from making such allegations now.[34]
[34]Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507, 517–18 [22] (French CJ, Bell, Gageler and Keane JJ).

The plaintiff’s position

At the hearing, counsel for the plaintiff submitted that the plaintiff does not necessarily accept at this stage that the DOA is binding, but that the plaintiff will deal with it on the basis that, even if it is binding or even if the Representation was made, it does not give rise to a proprietary interest in the Property. Apart from referring to the validity of the DOA, the plaintiff did not pursue any invalidity as an issue for determination by me.

The plaintiff contended that in any proprietary estoppel claim, the maximum relief that can be claimed is expectation relief; that is, that the representor is held to the representation. The plaintiff contended that the operation of an estoppel is to preclude departure from an assumed state of affairs, and that expectation relief could be said to be based on the equitable maxim that ‘equity regards as done that which ought to be done’. The plaintiff contended that, in this case, the expectation relief would mean that the second defendant would be entitled to insist that the Deceased’s estate be distributed as if the Deceased did carry out the purported Representation, which is as if the Deceased did execute a will in which he devised his one-half interest in the Property to the second defendant. The plaintiff, as executor of the Deceased’s estate, would be estopped from denying that the Deceased’s last will devises the Deceased’s one-half interest in the Property to the second defendant. The plaintiff contended that, by relying on McNab,[35] the second defendant was trying to put himself in a better position by claiming a proprietary interest than if the Deceased had actually carried out the Representation.
[35](2017) 53 VR 311.

The plaintiff also contended that any proprietary estoppel would not give the second defendant a current proprietary interest in the Deceased’s one-half interest in the Property such as to support a caveat. The plaintiff contended that this is the critical issue. The plaintiff referred to Official Receiver in Bankruptcy v Schultz (‘Schultz’),[36] and contended that the High Court made it clear that a beneficiary of a specific bequest or devise has no proprietary interest in any of the property of the deceased.
[36](1990) 170 CLR 306, 312 (‘Schultz’).

The plaintiff contended that the timing is critical in this case, and that denying the second defendant’s current claim is not completely denying the second defendant from making a claim at the appropriate time in the future. It is merely finding that the second defendant’s claim is premature and cannot be pursued until the estate has been fully administered. The plaintiff contended that once the estate has been administered, the Part IV claim has been dealt with and the plaintiff as executor has recovered his expenses of the administration of the estate and claimed commission, then the second defendant can pursue his claim for a constructive trust over what is left over in the estate from the Deceased’s half share of the proceeds of the sale of the Property. The plaintiff contended that before this point is reached, there is no certainty of subject matter to impose a constructive trust. The plaintiff contended that there is no constructive trust at this stage because the subject matter of a constructive trust is the property that the second defendant would have received if the Representation was made good.

The plaintiff contended that one of the key elements of proprietary estoppel is that the departure from the representation would be unconscionable and that, in this case, any unconscionable departure from the Representation would only occur if and when the executor purports to distribute whatever is left over in the estate to someone other than the second defendant.

The plaintiff contended that there is a logical disconnect in the second defendant’s submission that the constructive trust is to be treated as coming into existence when he relied on the promise to his detriment. The plaintiff contended that if the constructive trust is to be treated as coming into existence when the DOA was signed in 2005, it would mean that from that time, the Deceased no longer held any beneficial interest in the Property and that any will the Deceased did execute devising his one-half interest in the Property to the second defendant would be completely ineffective because the Deceased would have already disposed of his half interest in the Property before he died. Further, the plaintiff contended that there are three types of representations: a representation as to immediate ownership; a representation as to the creation and conferral of a life interest and a remainder interest; and a promise to leave property by will.

The plaintiff contended that the second defendant had placed sole reliance upon the decision of the Victorian Court of Appeal in McNab[37] to support his submission that the constructive trust is to be treated as coming into existence when he relied on the promise to his detriment. The plaintiff contended that McNab said that a constructive trust is institutional, not remedial. The plaintiff contended that in McNab, Tate JA stated that it was not necessary to decide whether the constructive trust arose before, at, or even after the death of the deceased in that case; eschewed making any specific finding in relation to when the constructive trust arose; and was content to decide ‘[o]n any account’ that the constructive trust arose prior to the commencement of that proceeding.[38] Accordingly, the plaintiff contended that the Court should reject the second defendant’s submission that the constructive trust arose when the second defendant permitted the Deceased to live in the Property rent-free or at least when the Deceased took up residence in the Property consistently with that promise. The plaintiff contended that there is no specific finding by the Court of Appeal in McNab that the constructive trust arose prior to death.
[37](2017) 53 VR 311.
[38]Ibid 347 [114].

The plaintiff contended that the facts in McNab can be distinguished by: the different nature of the representations; the degree of detrimental reliance; and the intervention of third parties.

The plaintiff contended that, with respect to the nature of representations, in McNab, there were numerous oral representations made over a 24 year period, which differs to the single written Representation purportedly made by the Deceased. In McNab, the representations were either in the nature of a representation as to immediate ownership (similar to ‘this property belongs to you’), or a representation as to the creation and conferral of a life interest and remainder interest (‘the property will belong to you when I die’). The plaintiff contended that the nature of the representations was that it was a guarantee. However, the only representation purportedly made by the Deceased was that he would execute a will in which he will devise his one-half interest in the Property to the second defendant. The plaintiff contended that while this may lead to the representee acquiring an interest in the property in the future, it is subject to a whole range of contingencies. For example, if the second defendant had passed away before the Deceased and if the property was subject to a constructive trust when there was detrimental reliance, then there is a situation where a constructive trust arises and then disappears.

With respect to detrimental reliance, the plaintiff contended that the Deceased did not need any permission from the second defendant to reside at the Property and had no obligation to pay rent to the second defendant because the Deceased was a co-owner of the Property and was therefore entitled to possession of the whole of the Property. Further, the plaintiff contended that there was no evidence before the Court that, but for the DOA and the representations it contains, the second defendant had any intention or desire to exercise his right as a co-owner to possession of the Property. For example, there was no evidence that the second defendant wanted to sell the Property or that he was paying rent elsewhere and wanted to move into the Property to save on the rent, but that he did not do so because of the Representation. The plaintiff contended that the evidence before the Court was that the Deceased lived at the Property continuously from 1980 onwards, the second defendant never lived at the Property, and the relationship between the second defendant and the Deceased was always strained. The plaintiff contended that it was unlikely that the second defendant would have wanted to live at the Property. The plaintiff contended that there could not be a greater contrast between the lack of any substantial detrimental reliance by the second defendant on the one hand, and the substantial, long term and life-changing decisions of a profoundly personal nature beyond the measure of money in McNab. Further, the plaintiff contended that the second defendant gave up his right to sell the Property. As a co-owner, he could have applied to VCAT to sell the Property, but there was no evidence from the second defendant saying that he intended to sell the Property. The plaintiff contended that there was evidence to the contrary and that he had a particular sentimental attachment to the Property and did not want it sold. The plaintiff contended that the second defendant misinterpreted what detrimental reliance is by contending that the detriment is that he does not get the Property. The plaintiff contended that the second defendant is putting the relief that he does not get ahead of the entitlement to that relief. The plaintiff contended that the detrimental reliance is what was done in reliance of the representation before it could be carried out.

With respect to the intervention of third parties, the plaintiff contended that the Court of Appeal in McNab specifically acknowledged that the Court needs to consider third parties who would be prejudiced by an order declaring a constructive trust.[39] The plaintiff contended that, in McNab, the Court of Appeal rejected that a particular entity was a third party, stating that their interest ‘arose because it was a beneficiary under the Will. It was a volunteer with no other claim and equity does not assist a volunteer’.[40] The plaintiff contended that, in this proceeding, both the plaintiff as executor and the daughter of the Deceased are third parties who would be prejudiced by an order declaring a constructive trust. The plaintiff as executor needs part of the Deceased’s half share of the proceeds of sale of the Property to meet the costs of the administration of the estate, and the daughter of the Deceased has commenced the Part IV proceeding to claim for provision from the estate. The plaintiff contended that the second defendant had made no submissions in relation to the position of the daughter of the Deceased. In relation to the plaintiff, the plaintiff contended that he is suing in his capacity as the executor of the estate, and not as a beneficiary or volunteer. As an executor, the plaintiff has onerous obligations, duties and liabilities. In return, the executor has a right of indemnity from estate assets for his expenses and liabilities properly incurred in the course of administration and a right to claim commission pursuant to s 65 of the Administration and Probate Act 1958 (Vic). The plaintiff contended that these entitlements of the plaintiff as executor are completely separate to any entitlement the plaintiff has as the named beneficiary in the Deceased’s will. The plaintiff contended that in McNab, the proceedings were commenced more than 17 years after the death of the deceased in that case, and that there was no suggestion that the relevant property may be needed by the executor for the costs of the administration of the estate. The purported third party in McNab was not the executor, only a beneficiary, and there was no extant claim against the estate pursuant to Part IV of the Administration and Probate Act 1958 (Vic). Further, the plaintiff contended that a Part IV claimant is not a volunteer and is not claiming as a beneficiary, but a Part IV claimant has a statutory right to apply for provision.
[39]Ibid 314 [7], 344 [108].
[40]Ibid 353–4 [133] (citations omitted).

The plaintiff also contended that it would be erroneous to blindly apply McNab without also giving consideration to the High Court authority of Barns.[41] The plaintiff contended that Barns, including any obiter, is binding on this Court. The plaintiff contended that, in Barns, the High Court noted academic criticism of the decision of McPherson J in Bigg v Queensland Trustees Ltd (‘Bigg’)[42] for ‘finding a ground of equitable intervention by declaration of constructive trust where the appropriate action was no more than for damages for breach of the agreement’.[43] The High Court also stated:

Bigg does not deal with the situation which would arise if, on the facts of that case, a dependant of the deceased by application under the Inheritance Act sought to intercept by order thereunder the making of a declaration of trust in favour of the survivor.[44]

[41](2003) 214 CLR 169.

[42][1990] 2 Qd R 11.

[43]Barns (2003) 214 CLR 169, 200 [86].

[44]Ibid 200 [87].

The plaintiff contended that the High Court in Barns considered that where claims in contract are sufficient, equity is not to be relied on. The plaintiff contended that if the DOA is enforceable, then the claim of contract would be sufficient.

The plaintiff also contended that, in Bigg, a mutual will case, the subject matter of the constructive trust only arose once the estate was being administered.

At the hearing, counsel for the plaintiff also referred to Schaefer v Schuhmann,[45] a Privy Council contract case from which the High Court in Barns departed, and counsel for the plaintiff submitted that what the High Court said in relation to Schaefer v Schuhmann is equally relevant to this case. Counsel for the plaintiff submitted that Schaefer v Schuhmann was authority for the principle that a family provision claim could be avoided by entering into a contract to make a will.
[45][1972] AC 572.

The plaintiff contended that Barns makes it clear that a deceased’s promise to make a particular testamentary disposition is subject to the potential operation of an order under the applicable State family provision legislation. Therefore, the Deceased’s half share of the Property forms part of his estate for the purposes of the Deceased’s daughter’s application under Part IV of the Administration and Probate Act 1958 (Vic).

The plaintiff contended that if the Court were to make a declaration that the Deceased held his half interest in the Property on a constructive trust that arose prior to the Deceased’s death, the Deceased’s daughter’s claim in the Part IV proceeding will fail because there will be no assets in the estate from which the Court could order further provision. The plaintiff contended that this will create an enormous loophole in the effectiveness of family provision legislation, which the High Court was careful to exclude in Barns. The plaintiff contended that, in the future, a person in Victoria can defeat any potential family provision claim against their estate by representing to intended beneficiaries that they will make, or have already made, a will leaving property to the beneficiaries and encouraging them to detrimentally rely upon that representation.

Further, the plaintiff contended that the second defendant seeks orders that the caveat is amended and then that he has 30 days to commence a proceeding presumably to seek an order that the executor transfer the Property to him based on this claim. Although counsel for the plaintiff accepted at the hearing that there can be a hearing on that basis, he contended that that would only diminish the assets of the estate, including the assets available to the daughter of the Deceased in her family provision claim.

The plaintiff also contended that in determining a removal of the hypothetical caveat if amended, the caveator would need to establish a prima facie case and the balance of convenience. The plaintiff contended that the balance of convenience favours him because the second defendant could have brought this proceeding at least 18 months ago, when the second defendant found out that the Deceased’s will did not leave the Property to him. The plaintiff contended that there was no evidence as to why he did not bring the proceeding earlier.

The second defendant’s position in reply

The second defendant contended that the expectation is a proprietary interest, which is the point of proprietary estoppel as distinct from estoppel more generally. It is the inducement of an expectation in property in the future. The second defendant contended that if it is necessary for the Court to give effect to that proprietary interest, the Court will impose a proprietary remedy in the form of a constructive trust.

With respect to the plaintiff’s submission that if the Deceased did not hold the Property beneficially then he could not make a will complying with the promise, the second defendant contended that if the Deceased had made a will in the way that he had promised, the parties would not be in the current situation and there would be no occasion for the intervention of equity. The second defendant contended that the reality is that a promise was made and there was unconscionable departure from that promise. The second defendant contended that in Barns, the first to die had not done anything unconscionable and they were the beneficial owner of all their property, and, therefore, Part IV orders could be made out of the estate. However, the second defendant contended that is not the case in this proceeding. At the hearing, counsel for the second defendant accepted that if the will had been made as promised, the Deceased’s estate would be available for a Part IV claim and the executor would be entitled to various charges to be reimbursed from the Property. The second defendant contended that the Court should not tailor a remedy that still recognises that position because the plaintiff is the sole beneficiary under the will and is suing in his own interest, rather than as executor. The second defendant contended that the plaintiff ought not to be entitled in those circumstances, although there may be certain fees that are justifiable such as applying for grant of probate, but not an indemnity for the Property in terms of this proceeding. With respect to the Part IV proceeding, the second defendant contended that the plaintiff may be entitled to some indemnity for that.

The second defendant contended that Schultz[46] held that, prior to administration, the beneficiary of an interest under a will has no proprietary interest in the estate, only a right to due administration, which is not a caveatable interest. At the hearing, counsel for the second defendant had submitted that the reasoning in Schultz does not apply because a proprietary interest arises from the estoppel, not from the will.
[46](1990) 170 CLR 306.

Further, with respect to the plaintiff’s submission about how a constructive trust can arise if the Deceased had pre-deceased the second defendant, the second defendant contended that when the Court declares a constructive trust, that is when the Court decides when the constructive trust ought to have come into existence.

The second defendant contended that McNab is authority for the proposition that a constructive trust based on proprietary estoppel arises when the defendant acted in reliance on the representation,[47] and that the proposition forms part of the ratio of that case. The second defendant contended that from the moment the second defendant acted in reliance on the Representation, the Deceased became a constructive trustee of his interest in the Property in favour of the second defendant. The second defendant contended that the effect of McNab is that when the Deceased passed away, he held his legal interest in the Property on constructive trust for the second defendant, and that the Deceased’s half share in the Property did not fall into his estate because he was not the beneficial owner of it. The second defendant contended that, in McNab, the Court of Appeal held that the constructive trust arose either before or at the time of the deceased’s death and that he had died as a constructive trustee of the property.[48]
[47]McNab (2017) 53 VR 311, 342 [102], 344 [107]–[108] (Tate JA, with whom Santamaria JA and Keogh AJA agreed).
[48]Ibid 346–7 [114], 354 [133].

With respect to the plaintiff’s submission that McNab can be distinguished, the second defendant contended that:

(a) the plaintiff’s submission that the nature of the representation in McNab was of immediate ownership is false. The Court of Appeal stated ‘[i]n this proceeding, a judge of the County Court determined that a landowner had represented that he would leave in his Will “an absolute interest” in that land to persons who had cared for him’,[49] and this finding was not disturbed on appeal. The second defendant contended that the representations in McNab and in this case are relevantly identical as they both involve a promise to leave an interest in property by will;

(b) the reliance of the second defendant is that he relied on the Deceased’s promise by letting the Deceased have the sole use and occupation of the Property rent‑free and by forfeiting his right to use and enjoy the Property for the 11 years that the Deceased resided there. The second defendant also contended that he also forfeited his right to apply for the sale and division of the Property. The second defendant contended that the detriment is in the context of the acts of reliance, and the detriment is allowing the Deceased to live in the Property for 11 years and giving up the valuable rights. The second defendant contended that this is a source of prejudice to the second defendant if the Deceased is allowed to depart from that. With respect to how detriment and reliance relate, the second defendant referred to Grundt v Great Boulder Pty Gold Mines Ltd,[50] which was quoted in Sidhu v Van Dyke;[51] and

(c) the second defendant accepted the plaintiff’s submission that the Court needs to consider whether third parties might be prejudiced by an order declaring a constructive trust. The second defendant contended that in a case of proprietary estoppel, prima facie a court will impose a constructive trust to enforce the promise, but a court may impose a lesser remedy where ‘[i]t would be wholly inequitable and unjust to insist upon a disproportionate making good of the relevant assumption’.[52] The second defendant contended that it would not be inequitably harsh or unjust to grant a proprietary remedy in this case, having regard to the interests of the plaintiff as executor and the Deceased’s daughter as a Part IV applicant. The second defendant contended that the plaintiff’s costs of applying for probate and administering an estate ought to be very small, which will not justify denying the second defendant a proprietary interest. The second defendant contended that, with respect to the plaintiff’s costs in bringing this proceeding, as the plaintiff is the sole beneficiary of the Deceased’s estate, when an executor has a personal interest in the outcome, the Court may disallow an indemnity for his legal costs.[53] The second defendant contended that given the plaintiff’s personal interest in the outcome of the proceeding, it is not inequitably harsh to grant the second defendant a proprietary remedy. Further, the second defendant contended that, assuming the second defendant’s ultimate claim will be successful, the Deceased blatantly departed from the promise made in the DOA after the second defendant allowed the Deceased to have the sole use of the Property for 11 years from 2005 until he permanently vacated in 2016. The second defendant contended that, therefore, the Court should have no hesitation in preventing anyone from deriving an interest through the Deceased’s unconscionable conduct, including any Part IV applicant.

[49]Ibid 313 [1] (citations omitted).

[50](1937) 59 CLR 641.

[51](2014) 251 CLR 505, 528–9 [80].

[52]Ibid 530 [85] (French CJ, Kiefel, Bell and Keane JJ), quoting Commonwealth v Verwayen (1990) 170 CLR 394, 413 (Mason CJ).

[53]Wareham v Marsella (No 2) [2020] VSCA 118, [20]–[22] (Tate, McLeish and Hargrave JJA).

With respect to Barns,[54] the second defendant contended that it did not hold that any promise to make a particular testamentary disposition is subject to a Part IV order. The second defendant contended that Barns held that the estate of the first to die in a mutual wills situation is available to satisfy a Part IV order and that Barns was not a case of proprietary estoppel. The second defendant referred to the joint judgment of Gummow and Hayne JJ, in which their Honours stated: ‘Further issues [in cases involving the breaking of a promise to make a will in a particular form] may arise respecting the doctrine of part-performance and proprietary estoppel’.[55] The second defendant contended that McNab is not inconsistent with Barns.
[54](2003) 214 CLR 169.
[55]Ibid 197 [75] (citations omitted).

The second defendant contended that even if Barns did hold that any promise to make a particular testamentary disposition was subject to a Part IV order, it was only obiter. The second defendant contended that this Court is bound to follow McNab and that if the correctness of McNab needs to be revisited in light of Barns, now is not the occasion for it. At the hearing, counsel for the second defendant submitted that this application is not an appropriate forum to determine the question of the interaction of the principles discussed in Barns and McNab as this application is an interlocutory hearing within a summary hearing. Counsel for the second defendant submitted that the second defendant ought not to be shut out from ventilating the issues in an ultimate hearing by a predetermination of those issues in this forum.

The second defendant contended that, in any event, the facts of Barns and the facts of this case are very different and, therefore, Barns does not apply. The second defendant contended that in Barns, the first to die was the beneficial owner of his assets and he had not engaged in any unconscientious conduct that might have enlivened the doctrines of equity.[56] The second defendant contended that, therefore, his assets formed part of his estate and for the purposes of Part IV legislation. The second defendant contended that, in this proceeding, the Deceased had engaged in unconscionable conduct by making a will inconsistent with his promise to leave his interest in the Property to the second defendant. The second defendant contended that, by applying the reasoning of McNab, the Deceased was not the beneficial owner of a half interest in the Property at the time of his death.
[56]Ibid 198–9 [82] (Gummow and Hayne JJ).

The second defendant contended that there would not be a loophole if McNab was allowed to stand because proprietary estoppel requires the unconscionability of the other party. The second defendant contended that if someone wanted to enter into an agreement for the transfer of property that becomes due at their death without relying upon proprietary estoppel, it would not be an agreement that the transfer of property goes via a will, but it would be an agreement that it becomes due upon death and the promisee could sue against the estate and it would not fall into the estate.

The second defendant also contended that the balance of convenience is not a matter that is relevant to the amendment of the Caveat, although the submission will be that the valuable interest in property will make the balance of convenience favour the second defendant.

Further, counsel for the second defendant submitted that, at this stage, all that the Court will need to be satisfied of is that the second defendant has a prima facie case to some sort of proprietary remedy justifying the maintenance of the Caveat. The second defendant contended that it is not the job of this Court to determine the exact relief to be provided, which is the role of the judge in the final hearing.

Consideration

Given that the amendment sought in this proceeding is to the grounds of claim of the Caveat, the most important factor in this proceeding is the overall merits of the claim for a caveatable interest. As Macaulay J stated in Percy v Gangemi,[57] the Court should have regard to the same considerations which arise on an application for the removal of a caveat in the terms sought. Warren CJ set out a two-stage test in Piroshenko v Grojsman[58] as follows:[59]

[W]hen application is made for [the] removal [of a caveat,] 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.

[57][2010] VSC 530, [105].

[58](2010) 27 VR 489.

[59]Ibid 491 [7].

In Lawrence & Hanson Group Pty Ltd v Young,[60] the Victorian Court of Appeal stated:[61]

Warren CJ’s statements in Piroshenko have been accepted by this Court as setting out the correct approach to the exercise of the discretion in s 90(3). In Carbon Black Lab Pty Ltd v Launer, this Court noted that in CFHW Pty Ltd v Burness Warren CJ expressed a preference for a ‘prima facie case’ test to be used instead of the ‘serious question to be tried’ test, and went on to state that caveators ‘must show that they have a prima facie case with sufficient likelihood of success to justify the maintenance of the caveat.’

[60][2017] VSCA 172.

[61]Ibid [38] (citations omitted).

The caveator must establish that he has a prima facie case that he has the interest claimed with a sufficient likelihood of success to justify the maintenance of a caveat, and whether the balance of convenience favours the maintenance of a caveat.

I note that in my determination of the overall merits of the second defendant’s claim for a caveatable interest, I have not considered the reasons of Matthews AsJ in Goldberg v Campbell & Shaw.[62]

Prima facie case

[62][2021] VSC 647.

The second defendant seeks to amend the Caveat because he contended that he has a caveatable interest that arises from a constructive trust through the doctrine of proprietary estoppel. In determining whether the second defendant has a prima facie case, I must consider whether there is a prima facie case for proprietary estoppel, and, if so, whether there is a prima facie case for a constructive trust.

In order to establish proprietary estoppel, the second defendant must establish the following elements:[63]
[63]See, eg, Harris v Harris [2020] VSC 256, [173] (John Dixon J).

(a) the Deceased made a representation to the second defendant that he would confer on the second defendant an interest in property;

(b) the second defendant reasonably believed or expected that he presently has, or in the future will acquire, an interest in property belonging to the Deceased;

(c) the Deceased knew or intended that the second defendant would hold that belief or expectation and would act or abstain from acting in reliance on it;

(d) the second defendant reasonably acted to his detriment and changed his position in reliance on his expectation or belief; and

(e) the detriment is such that it would be unconscionable for the Deceased to depart from his representation.

The second defendant contended that the representation made by the Deceased is that, by executing the DOA, if the second defendant permitted the Deceased to live at the Property rent-free, the Deceased would devise his half interest in the Property to the second defendant in his will. The plaintiff contended that this Representation does not confer a proprietary interest, only an expectation that is subject to contingencies. I note that although the plaintiff has somewhat questioned the validity of the DOA in his affidavit sworn on 5 November 2021, given that the plaintiff made submissions regardless of whether the DOA is binding, I decline to make any findings on the validity of the DOA and will proceed on the basis that the DOA is valid.

In McNab,[64] the deceased made oral promises that if Mr and Mrs Graham came to live next door and looked after him and his wife, then he would leave that property to them upon his death. The deceased had made such statements to Mr and Mrs Graham on numerous occasions. The trial judge held that these statements amounted to promises that an interest in property would be conferred to Mr and Mrs Graham by leaving the property to them in his will.[65] These finding of facts were not disturbed on appeal. In this proceeding, although the Representation is contended to arise from the DOA instead of numerous oral statements, I am satisfied that the Representation made by the Deceased to the second defendant that he will devise his half interest in the Property to the second defendant in his will is a representation of a conferral of a proprietary interest. This is consistent with McNab, in which the parties did not seek to appeal the trial judge’s finding that the representation was ultimately an interest in property that was to be conferred in a will. In light of McNab, I do not find that it is of any consequence that the Representation was subject to contingencies.
[64](2017) 53 VR 311.
[65]Ibid 322 [48]–[49].

In Flinn v Flinn,[66] the oral promises made were that the deceased would leave property in his will to the promisee, which were subsequently subject to conditions. The trial judge found that, on the evidence, the deceased had also made the promise on behalf of his wife and that the promise had also been made to the promisee’s wife. The Victorian Court of Appeal upheld the trial judge’s finding that a promise had been made, being a promise by the promisors to make provision concerning the relevant property in their wills, subject to conditions, in favour of the promisees in return for the promisees managing the property.[67] Brooking JA said in relation to a promise to leave property by will:[68]

Most people, I suppose, know that the maker of a will can revoke it at any time before death. How is a promise to leave property by will to be understood? Surely it will ordinarily be regarded by the promisee as a promise, not merely to make a will which can be revoked at any time before death, but to make a gift by means of an instrument which will take effect upon the donor’s death. In other words, the promise of a gift by will is ordinarily to be understood as meaning just that — an effective gift by will, taking effect on death, not an ineffective, because revoked, disposition. Of course it all depends on the circumstances. If a woman says to her niece, “It’s time I made a new will. I’ll see the solicitor soon. I’m going to leave you my house. But don’t forget that I might change my mind again and leave it to your brother next year”, any claim to an equity by proprietary estoppel would very likely break down at the start. This would be on the basis there had never been a promise to leave property by will, only an intimation of intention to make a will coupled with a disclaimer of an intention not to revoke it.
In the present case, on the evidence which the judge accepted, and on his findings, the promises made were, and were intended to be, and were reasonably understood and acted upon by the promisees as, promises of the making, not of a revocable testamentary instrument, but of a gift by will taking effect on death.

[66][1999] 3 VR 712.

[67]Ibid 734–5 [67], 735–6 [70] (Brooking JA, with Charles and Batt JJA agreeing).

[68]Ibid 736–7 [75]–[76] (Brooking JA, with Charles and Batt JJA agreeing) (emphasis in original). Cf Gillett v Holt [2001] Ch 210, 228, in which Robert Walker LJ noted that, generally, it would not be reasonable to rely on a living person’s representations as to their testamentary intentions; however, on the facts of the case, the expectation was reasonable because the promises were repeated over a long period, usually in the presence of company and sometimes in unambiguous terms: see Laird v Laird [2021] VSC 352, [18].

In this proceeding, the Representation is written, as opposed to oral, and is clear and unambiguous in that the Deceased is to execute a will in which he will devise his half interest in the Property to the second defendant pursuant to cl 3 of the DOA. Applying Flinn v Flinn, this Representation is therefore not to make a revocable will but to make a gift by will taking effect on the death of the Deceased.

Neither of the parties made submissions as to whether the second defendant’s belief or expectation that he had, or will acquire, an interest in the Property was reasonable. However, given that the Representation was expressly contained in the DOA, the words of the DOA give rise to such belief or expectation being reasonable.

The second defendant contended that the Deceased knew that he had adopted the expectation in his written submissions filed on 27 August 2021. Given that the DOA was executed by the second defendant and the Deceased, I am satisfied that it is likely that the Deceased knew that the second defendant would hold the expectation and would rely on it.

With respect to detrimental reliance, the second defendant, as the person to whom the Representation was made, has the burden of proving detrimental reliance.[69] The second defendant contended that he relied upon the Representation by permitting the Deceased to live in the Property rent-free and not applying for the sale of the Property and the division of proceeds. The second defendant contended that the detriment is that the second defendant did not live together with the Deceased at the Property when he was entitled to do so as co-owner, and that he allowed the Deceased to reside at the Property by himself without the second defendant claiming any rent in the context of the DOA.
[69]Harris v Harris [2020] VSC 256, [215] (John Dixon J).

In Sidhu v Van Dyke,[70] the appellant promised the respondent that the property she lived in would be given to her after subdivision. When the respondent divorced her husband, the appellant told her that she had the property and that she did not need a settlement from her ex-husband. The respondent carried out unpaid maintenance and renovation works for the property for 8.5 years in response to the appellant’s promises. The respondent also did work for the appellant’s other properties and, although she was employed part time elsewhere, she did not seek or engage in full time paid work during this time. The majority of the High Court found that detrimental reliance had been established because, amongst other things, it is unlikely that the respondent would have done what she did over 8.5 years if the appellant had not made those promises and she would likely have sought to maximise her income by seeking the most gainful form of employment.[71]
[70](2014) 251 CLR 505.
[71]Ibid 525–8 [67]–[78] (French CJ, Kiefel, Bell and Keane JJ).

In McNab,[72] the trial judge found that Mr and Mrs Graham suffered detrimental reliance which included: being carers of the deceased and his wife (until her death) for more than 20 years after moving into the property; Mrs Graham checking on the deceased’s wife every day as her health condition worsened; Mr and Mrs Graham performing house chores and cooking meals for the deceased and his wife; Mr Graham driving the deceased to and from medical appointments and hospital admissions when the deceased’s health deteriorated; and Mr Graham performing a number of renovations to the property.[73] This finding was not challenged on appeal.
[72](2017) 53 VR 311.
[73]Ibid 322–3 [50].

In both these cases, the representees improved the properties in question and rendered services to the representors in reliance on the representations that the properties will be given to them. By contrast, in this proceeding, the second defendant undertook no such conduct. Instead, the second defendant simply contended that he permitted the Deceased to live in the Property rent-free by himself and not apply for the sale of the Property and the division of proceeds. With respect to the second defendant’s submission that he gave up his right to also live together with the Deceased at the Property, I accept the plaintiff’s submission that there was no evidence that he intended to live at the Property, particularly when there was a strained relationship between the second defendant and the Deceased and when the second defendant had never lived at the Property. In my view, it is highly unlikely that the second defendant would have lived at the Property if the Representation had not been made.

Generally, co-owners are not required to pay rent for the use and occupation of the property.[74] However, there are exceptions to this general rule as follows:[75]
[74]Biviano v Natoli (1998) 43 NSWLR 695, 700 (Beazley JA, with whom Stein JA agreed).
[75]Bkassini v Sarkis [2017] NSWSC 1487, [130]–[135] (Robb J).

(a) actual ouster, in which the occupying co-owner excluded the other co-owner from exercising his or her right to possession (traditionally involving a civil wrong);

(b) constructive ouster, in which the occupying co-owner denied the title of the other co-owner;

(c) where the occupying co-owner seeks contribution for improvements to the property; and

(d) where there is a breakdown of a domestic relationship which makes it unreasonable or not practicably sensible for a co-owner to live with the occupying co-owner.

Another exception is where there is a lease agreement between the occupying co‑owner and the other co-owner.[76]
[76]Leigh v Dickeson (1884) 15 QBD 60, 66 (Cotton LJ), 68 (Lindley J), which affirmed the judgment of Pollock B in Leigh v Dickeson (1883) 12 QBD 194. I note that the reference to Leigh v Dickeson (1884) 15 QBD 60 in Australian cases generally refer to the principles regarding contributions of co-owners for improvements to the property: see, eg, Hoch v Hoch (2020) 6 QR 583, 591 [30] (Bradley J). However, the cases of Leigh v Dickeson have also been referred to as authority for the principle that a tenancy will give rise to an action for use and occupation: see Zegir v Woop [1955] VLR 394, 401 (Herring CJ); Broadway Pty Ltd v Lewis [2012] WASC 373, [84] (Pritchard J).

In this proceeding, the first four exceptions are not applicable and only the fifth exception regarding a lease agreement is relevant, given the existence of the DOA.

The question then is whether the DOA can constitute a lease agreement. To constitute a lease, the agreement must confer exclusive possession upon the tenant.[77] Of this applicable test, in Swan v Uecker,[78] Croft J stated:[79]
[77]Radaich v Smith (1959) 101 CLR 209, 214 (McTiernan J), 217–18 (Taylor J), 220 (Menzies J), 222 (Windeyer J). I note that Radaich v Smith is in the context of distinguishing a licence and a lease.
[78](2016) 50 VR 74.
[79]Ibid 85–6 [31] (citations omitted).

It is well accepted that, as a matter of law, the test to be applied to distinguish between a lease and a licence is whether or not what is granted is exclusive possession. Thus, in Lewis v Bell, Mahoney JA said:
In the present case, it was accepted, or at least assumed, that the test is that of exclusive possession. That, in my opinion, is correct. It is the test which was adopted by at least the majority of their Honours in Radaich v Smith. That that is, at least initially, the test, was affirmed by Mason J in Goldsworthy Mining Ltd v Federal Commissioner of Taxation. It is not necessary to analyse the precise nature of the right to exclusive possession which is here in question. It is, for present purposes, sufficient to say that it involves that the lessee have the general right to exclude others, including the lessor, from the premises, subject at least to such specific provisions for entry as may be particularly provided for in the document: cf the rights reserved in the Glenwood Lumber case. …
But there are cases in which it is not clear from the terms of the grant, construed in the light of the whole agreement and its context, what it is that is being granted by them. In such cases, it is necessary to determine what is granted by looking at other aspects of the transaction. Thus, a grant may not be in terms of ‘possession’ but of something else. It may be the grant of a right to occupy premises; the right to ‘carry on a business on’ the premises; or, as in the present case, the right ‘to use’ the premises either generally or in a particular way. In such cases, the court must, by the process of construction, determine whether what is granted is mere occupation or use, or is possession in the relevant sense. And where what is granted is possession, it still, in principle, may remain to be decided whether what is granted is exclusive possession. But it is not necessary to consider, in this case, whether there can be a distinction between possession and exclusive possession and (if there can) what distinctions there may be between possession and exclusive possession in this context.
In deciding, in such cases, whether what has been granted is the right to exclusive possession, the court, in the process of construction, has in practice looked, inter alia, to two things: the nature of the rights which, in terms, have been granted; and the intention of the parties.

Party intention in this context is to be determined objectively on the basis of the terms of the particular agreement under consideration and having regard to surrounding circumstances to the extent that is permissible according to the ordinary rules of construction.

In this proceeding, cl 1 of the DOA provided that the Deceased was ‘permitted to reside at the Property rent free for the term of his life on until he permanently vacates the property’. The right granted to the Deceased by this clause is not in terms of ‘possession’, but is in terms of residence or occupancy. The DOA did not set out anything about the Deceased residing at the Property to the exclusion of the second defendant or that the second defendant was excluded from residing at or gaining access to the Property.

The intention of the parties is also a relevant factor in determining whether the Deceased had a right to exclusive possession of the Property and such intention is determined objectively, based on the terms of the DOA and the surrounding circumstances. Pursuant to cl 2 of the DOA, the Deceased was ‘responsible for the payment of all outgoings including rates, taxes and insurance premiums and will maintain the property in its present condition’ during his residency. It is arguable that this clause is indicative of the parties’ objective intention that the Deceased had exclusive possession of the Property during his residency as he was solely responsible for the outgoings and maintenance of the Property during that time. However, this does not remove the possibility that the second defendant could have lived with the Deceased at the Property or accessed the Property at any point in time if he chose to do so. This is particularly so when the DOA conferred rights and obligations on the Deceased but none on the second defendant. Accordingly, there was no objective intention by the parties for the Deceased to have exclusive possession. I note that it is irrelevant to the determination of objective intention that the second defendant never lived or sought to live at the Property during the Deceased’s residency.

Therefore, the Deceased did not have a right to exclusive possession pursuant to the DOA, particularly in the absence of additional terms regarding the rights of the second defendant to access the Property. As such, the DOA did not constitute a lease agreement between the Deceased and the second defendant, and the Deceased would not have been liable to pay rent to the second defendant.

Further, the DOA did not provide for any rent to be paid by the Deceased to the second defendant given that cl 1 provided that the Deceased is ‘permitted to reside at the Property rent free for the term of his life on until he permanently vacates the property’ (emphasis added). The second defendant contended that he gave up the right to claim rent by permitting the Deceased to live at the Property all by himself rent-free pursuant to the DOA. However, as set out above, the Deceased would not have been liable to pay rent in any case as the DOA did not constitute a lease agreement. Hence, there cannot be any detrimental reliance by the second defendant when, in these circumstances, he would not be entitled to rent in any event.

Although the second defendant could apply for the sale of the Property and the division of the proceeds of sale, there was also no evidence that he intended to do so. Moreover, when the Deceased, by the plaintiff under a power of attorney, applied for the sale of the Property and division of proceeds in the first VCAT proceeding, the second defendant opposed such a course of action. Even now, the second defendant is seeking to prevent the sale of the Property and the division of the proceeds.

Further, unlike the representees in Sidhu v Van Dyke and McNab, the second defendant had not voluntarily contributed to the maintenance and upkeep of the whole of the Property. Instead, when the second defendant paid the outgoings and maintenance costs of the Property after the Deceased vacated the Property, he claimed half of those costs from the Deceased in the second VCAT proceeding, and he was granted those costs.[80]
[80]Mathers v McColley [2019] VCAT 1230, [13], [16].

Accordingly, I determine that the second defendant did not rely upon the Representation of the Deceased to his detriment. It follows that it was not unconscionable for the Deceased to depart from the Representation.

In the circumstances, I am not satisfied that the second defendant has established a prima facie case of proprietary estoppel to support the proposed amendment to the grounds of claim of the Caveat, and there is not a sufficient likelihood of success to justify the maintenance of such a caveat. Given my findings, I do not need to consider whether there is a prima facie case of a constructive trust arising by reason of proprietary estoppel.

Balance of convenience

With respect to the test of the balance of convenience, in Percy v Gangemi,[81] Macaulay J quoted the Victorian Court of Appeal in Bradto Pty Ltd v Victoria.[82] The Court of Appeal stated:[83]

In our view, the flexibility and adaptability of the remedy of injunction as an instrument of justice will be best served by the adoption of the Hoffmann approach. That is, whether the relief sought is prohibitory or mandatory, the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’, in the sense of granting an injunction to a party who fails to establish his right at the trial, or in failing to grant an injunction to a party who succeeds at trial.

[81][2010] VSC 530, [144].

[82](2006) 15 VR 65.

[83]Ibid 73 [35] (Maxwell P and Charles JA).

While counsel for the second defendant submitted that the balance of convenience is not relevant to the application to amend a caveat, it is a factor that ought to be considered as set out above. However, in this proceeding, given that I have found that there is no prima facie case of proprietary estoppel, I do not need to consider whether the balance of convenience would justify the maintenance of a caveat as sought to be amended by the second defendant.

Conclusion

Although I find that the amendment proposed by the second defendant would not irreparably detract from the principle that the Court should not readily allow caveats to be imprecisely formulated and then later amended, I will not grant leave for the second defendant to amend the grounds of claim in the Caveat because I am not satisfied that he has established a prima facie case of proprietary estoppel that has a sufficient likelihood of success to justify the maintenance of the proposed amended caveat.

As a consequence, I do not need to consider how any amendment ought to be phrased.

Orders

The second defendant’s summons filed on 22 October 2021 is dismissed.
The second defendant pay the plaintiff’s costs, including reserved costs, of and incidental to the second defendant’s summons filed on 22 October 2021 on a standard basis.

[2022] VSC 24

3 February 2022