Lee v Yap

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2021 0088

YEW HAN LEE	Applicant
v
ENG HOCK YAP & ORS (according to the attached Schedule)	Respondents

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JUDGES:	KYROU, McLEISH and WALKER JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	19 October 2021
DATE OF JUDGMENT:	3 November 2021
MEDIUM NEUTRAL CITATION:	[2021] VSCA 297
JUDGMENT APPEALED FROM:	Lee v Yap (Supreme Court of Victoria, McDonald J, 25 June 2021).

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REAL PROPERTY – Caveat – Appeal against dismissal of application to remove caveats – Where applicant contracted to sell property subject to caveats – Where respondents claim interest in property in separate proceeding – Whether judge erred in refusing to remove caveats – Whether balance of convenience favoured removal – Whether judge placed undue weight on proposed undertaking proffered by applicant in separate proceeding – Whether judge erred in making certain findings with respect to proposed undertaking – Specific error established – Appeal allowed – Caveats removed – Bradto Pty Ltd v Victoria (2006) 15 VR 65; Piroshenko v Grojsman (2010) 27 VR 389; Carbon Black Lab Pty Ltd v Launer [2015] VSCA 126, considered – Transfer of Land Act 1958 s 90(3).

PRACTICE AND PROCEDURE – Application for extension of time – Delay of two business days in filing application for leave to appeal – No satisfactory explanation for delay given – Whether lack of satisfactory explanation outweighed by merits of appeal – Extension granted – Supreme Court (General Civil Procedure) Rules 2015 r 64.08.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr D J Williams QC	Welner Lawyers
For the First and Second Respondents	Mr I D Martindale QC with Ms C Willshire	Willocks Lawyers
For the Third Respondent	Mr P G Turner	Robinson Gill Lawyers
For the Fourth Respondent	No appearance

KYROU JA
McLEISH JA
WALKER JA:

The applicant, Ms Lee, is the registered owner of a property in Iris Road, Glen Iris. The Glen Iris property was transferred to her in 2005 by Yap Brothers Holdings Pty Ltd (the ‘trustee’), which was the trustee of the Yap Brothers Family trust (the ‘trust’), for no consideration. Ms Lee is a director of the trustee. The Glen Iris property is subject to three caveats, lodged by the first to third respondents (the ‘caveators’ or the ‘respondents’). It is also subject to a mortgage in favour of DBS Bank (Hong Kong) Ltd. Ms Lee and the caveators are involved in a dispute about the Glen Iris property in separate proceedings, in which the caveators allege that the property was transferred to Ms Lee in breach of her duties to the trust (the ‘substantive proceeding’). The caveators allege that the property is held by Ms Lee on a resulting trust for those persons who made contributions to the trustee.

In July 2019, in the substantive proceeding, the first respondent and another party[1] applied to have a receiver appointed to the trust to secure the trust property. Ms Lee and the third respondent were the first and fourth defendants to that application. Prior to the application being heard, the defendants proffered two undertakings: an undertaking not to deal with the Glen Iris property prior to the resolution of the substantive proceeding (the ‘Proposed Undertaking’), and a separate undertaking not to deal with two other properties owned by the trustee in Carlton and Balwyn. When the application was heard before a judge, it was resolved by the defendants undertaking to lodge with the Prothonotary the title deeds to the Carlton and Balwyn properties, together with an acknowledgement by Ms Lee’s counsel that the income paid to Ms Lee by the trust between then and the trial date would be subject to an accounting at the end of the proceeding if necessary. On that basis the application for a receiver to be appointed was abandoned. The other two undertakings proffered, including the Proposed Undertaking, were not sought or given.
[1]See [12] below.

On 29 April 2021, Ms Lee entered into a contract to sell the Glen Iris property; settlement was due on 15 June 2021. In order to enable the settlement to proceed, Ms Lee sought removal of the caveats pursuant to s 90(3) of the Transfer of Land Act 1958. The caveators resisted the removal of the caveats. It was common ground that the caveators had an arguable case that they had a caveatable interest in the Glen Iris property. The only issue before the primary judge was where the balance of convenience lay. The judge declined to order the removal of the caveats.[2]
[2]Transcript of Proceedings, Lee v Yap (Supreme Court of Victoria, McDonald J, 25 June 2021) 57–64 (‘Reasons’).

Ms Lee now seeks leave to appeal from that decision. She relies upon three grounds of appeal, in summary as follows:

(a) that the primary judge made a specific error in treating as decisive, or according substantial weight to, the Proposed Undertaking, when it was irrelevant;

(b) that the judge erred in speculating as to the role that the Proposed Undertaking played in the resolution of the receivership application; and

(c) if no specific error can be made out, that the result below was so plainly unreasonable that this Court should infer a failure properly to exercise the discretion.

Ms Lee’s application for leave to appeal was filed out of time, so she sought an extension of time in which to file the application.

We would grant Ms Lee’s application for an extension of time, grant leave to appeal and allow the appeal. In summary:

(d) As to the extension of time, although no satisfactory explanation was given for the delay, the extremely short delay (in the order of two business days), the lack of prejudice to the respondents and the merits of the application for leave to appeal weigh strongly in favour of a grant of an extension of time.

(e) As to the application for leave to appeal, the merits of the application favour the grant of leave.

(f) As to the appeal, we consider that the applicant has made good her proposition that the judge made a specific error in the manner in which he relied upon the Proposed Undertaking, which was proffered but expressly rejected by the applicants for a receivership order in the substantive proceeding (including the first respondent). That error led his Honour to make an erroneous finding of fact concerning the basis on which the receivership application was resolved, which then infected his Honour’s resolution of where the balance of convenience lay in relation to the application for removal of the caveats.

Factual and procedural background

Ms Lee has, since 25 July 2005, been the registered proprietor of the Glen Iris property. The title to the property is subject to:

(g) Mortgage AH61438A in favour of DBS Bank (Hong Kong) Ltd;

(h) Caveat AM265813A lodged by the first respondent, Eng Hock Yap, on 20 October 2015;

(i) Caveat AU346014N lodged by the second respondent, Sau Lin Kam, on 17 May 2021; and

(j) Caveat AU456863A lodged by the third respondent, Eng Hing Yap, on 15 June 2021.

As noted above, Ms Lee has sold the Glen Iris property, and settlement of the sale was due on 15 June 2021. In order to enable the settlement to occur an urgent application was made by Ms Lee seeking orders for removal of the caveats from the Register. The application was heard on 25 June 2021. The caveators opposed the application. The fourth respondent, the Registrar of Titles, took a neutral position. The judge ordered that the summons be dismissed.

There is a wider context and background to the facts giving rise to the caveat removal application. The substantive proceeding is a separate proceeding in the Trial Division, in which the first and second respondents, together with Chin Huat Yap, who is Ms Lee’s former husband, are plaintiffs; and Ms Lee, the trustee, Eng Seng (Vincent) Yap and the third respondent are defendants.

As we have already stated, the trustee was the trustee of the trust, which was established in April 1982, and Ms Lee is a director of the trustee. By orders made in the substantive proceeding on 10 October 2019, the Court declared by consent that:

(k) the trust has failed for uncertainty; and

(l) the trustee holds all of its property, rights and assets acquired by it as trustee of the trust on one or more than one resulting trust for those who have contributed property to the trustee at any time.

In the substantive proceeding, the parties other than the trustee claim that they have made contributions of property to the trustee and are thereby beneficiaries of the resulting trusts. Further, the plaintiffs claim that the transfer of the Glen Iris property to Ms Lee for no consideration in 2005, after the loss of the trust deed had been discovered by her in mid-1998, occurred in breach of her duties to the trust, and that the property is therefore held on the resulting trusts in accordance with the Court’s orders in the substantive proceeding.

In July 2019 the first respondent and his son, Adam Yap, who was then the second plaintiff in the substantive proceeding (the ‘receivership applicants’), made an application in that proceeding for the appointment of a receiver to the assets of the trust. The receivership application was heard by the primary judge on 5 August 2019. Because of the prominence of that application, and its resolution, in the judge’s decision and in argument before us, it is necessary to set out in some detail the background to the hearing of the application and what occurred at the hearing.

Ms Lee filed an affidavit in response to the receivership application. In her affidavit she identified the assets of the trust as including cash, shares, the Carlton and Balwyn properties. Later in her affidavit she dealt with ‘other assets that have been bought and sold by the trust’, which included the Glen Iris property. She deposed to the transfer of that property to her by the trustee in 2005. At the conclusion of her affidavit, in a paragraph headed ‘No risk to assets of trust’, she deposed as follows:

The assets of the trust have been owned by Yap Bothers and the trustee of the trust for many years. Neither I nor the directors of Yap Brothers (my sons Vincent and William) have any intention of disposing or encumbering the assets of the trust before the trial of this proceeding. Moreover the plaintiffs have placed caveats on all the trusts’ [sic] properties.

In written submissions filed in advance of the hearing, Ms Lee and the third and fourth defendants made the following submissions:

3.The First, Third and Fourth Defendants submit that the appointment of a receiver is not warranted for the following reasons: (1) there is no risk to the assets of the trust between now and the trial; …
…

F. The trust assets are not in jeopardy
36.The assets of the trust are not in jeopardy or in any form of imminent danger so as to warrant the appointment of a receiver on an interlocutory basis.
37.The primary assets of the trust comprise the properties in Balwyn and Carlton. … There is no proposal to sell or encumber these assets. In April 2017, shortly after the commencement of this proceeding, undertakings were offered by each of the directors of the Second Defendant not to deal with or dispose of or encumber the assets of the trust. There is no evidence that the assets of the trust have been dealt with in a manner which is inconsistent with these undertakings.
38.Further, each of the properties are subject to caveats lodged by the First Plaintiff in 2015 and Chin Huat in 2014. Each caveat prohibits dealings with the properties absolutely.
39.Additionally, the First Defendant has given evidence [that] the directors of the trustee do not intend to dispose of or encumber the assets of the trust prior to trial. To this end, each director of the trustee will proffer undertakings to the Court not to deal with the properties pending the determination of the proceeding or further order. The form of undertaking is set out in the attached draft order.
40.In these circumstances, there is no imminent danger to the real property assets owned by the trust. Further, in light of the proposed undertakings offered on behalf of the directors of the trustee, it is difficult to see how the legal remedies available to the Plaintiffs would be inadequate.
41.The only assets excluded from the undertakings are the shares and cash held by the trust.

The Glen Iris property was addressed separately, in a later part of the written submissions, under the heading ‘H. The transfer of the Glen Iris property’. No reference was made to any undertaking concerning that property.

The proposed orders annexed to the written submissions included a proposed undertaking by Ms Lee and the third and fourth defendants in relation to the Balwyn and Carlton properties and the shares held by the trust, as well as the Proposed Undertaking, that is an undertaking to be given by Ms Lee not to sell or otherwise deal with the Glen Iris property.

At the hearing of the receivership application on 5 August 2019, the following exchange occurred between the judge and counsel for the receivership applicants (emphasis added here and below):

HIS HONOUR: Well, it’s put against you that on an interlocutory application — to appoint a receiver on an interlocutory application, in the ordinary course, the court would only take that step if there was some evidence that there was a risk to the trust property, and in this case, sitting here at the moment, there doesn’t seem to be. Well, there are undertakings given to the court in any event. So it’s not your conventional application for an interlocutory appointment of a receiver, is it, because there’s no risk to trust property?
MR EHRLICH: There is risk to the trust property, with respect, Your Honour.
HIS HONOUR: But there’s undertakings before the court.
MR EHRLICH: No. Your Honour, with respect, there have been no undertakings proffered to this court to deliver the trust — the title deeds to the court. That could have been done easily enough. It’s a very limited receivership, your Honour, and we’re not here in the sense of National Australia Bank trying to appoint a receiver to a business. All we’re asking for — all we’re asking for is someone to take control of the title deeds, which have been used, on any view, pursuant to a false uttering in the past of the trust deed.
So all we want is very limited. We want the trust deed, the title deeds taken — taken into control, because there are no mortgages over some of the properties, in which case the — and they have used the title deeds by way of mortgage deposit in the past.

Shortly afterwards, the following exchange occurred:

MR EHRLICH: So the first point is this, your Honour, if I can break it up into two places. Someone has to take control, in my respectful submission, of the — of the title deeds. They could be deposited with the court. The second point is someone has to — if there is, in fact, a failed trust, your Honour, on the basis - - -
HIS HONOUR: So just go back a step. You say the undertakings which are proffered — that the undertakings which are proffered, undertakings which would expose those who have given them to the risk of contempt proceedings and all that goes with that, Mr Ehrlich, you say the form of those undertakings, that I — that I shouldn’t be satisfied that they provide your client with sufficient protection. That’s your submission?
MR EHRLICH: My submission is, your Honour, that the trust property consists of title deeds. The title deeds — one shouldn’t have to — be concerned with undertakings. What one should — what the court should be concerned with, your Honour, is simply taking control of the — of the title deeds so that Your Honour knows that no issue will ever arise. I — I — I don’t make a submission - - -
HIS HONOUR: Very well. So you proffer one suggestion, being that the title deeds be placed in the custody of the court.
MR EHRLICH: Yes, your Honour.

In relation to the Glen Iris property, the following exchange occurred:

HIS HONOUR: So just go back a step. I saw your prayer for relief. So you have a concern about the Glen Iris property. You say the property has been transferred out of the trust to the first defendant in breach of the trust, and you want that property back in the trust, correct?
MR EHRLICH: The trust property is the trust property. Yes, your Honour.
HIS HONOUR: Yes. So you want that remitted to the trust.

And later, this exchange occurred:

The primary relief we seek today is security over the assets of the trust. Now, if your Honour was of the view - - -
HIS HONOUR: So if the trust deed — if the — if the deeds of the property — if the certificates of title of the property were paid into court, to use that analogy — it’s probably not a right analogy — that you would be content?
MR EHRLICH: Content subject to — can I just make this — can I make this proposition — I will make three propositions to your Honour: if the trust deeds were taken into the possession of the court - - -
HIS HONOUR: Yes.
MR EHRLICH: - - - we would be content with that. If the court was of the view that the investigations into contributions to the trust is premature and that the defendants should be given some further period of time to either produce the trust deed or bring a claim for secondary proof of the trust claim - - -
HIS HONOUR: Yes.
MR EHRLICH: - - - I would not object to that time being given.
HIS HONOUR: Yes.
MR EHRLICH: Then the only other question, then, becomes: what is the position in relation to the income that was being earned by the — earnt by the assets of the trust at this stage? It seems to me, in those circumstances, Your Honour, the income should be paid into court as well…

There was then some discussion about whether income should continue to be paid out of the trust to Ms Lee and, if so, whether there should be a cap on such payments. After that discussion, counsel for the receivership applicants said this:

MR EHRLICH: I wouldn’t even ask your Honour for a cap. I think, thinking on my feet at the moment, your Honour, we would be content with a regime in which the title deeds were delivered to the court, and certain income could be provided to the first defendant - - -
HIS HONOUR: Yes.
MR EHRLICH: - - - with liberty to apply. I don’t want to call it a hard cap, your Honour. And provided there’s an acknowledgment from my learned friend that, ultimately, at the end of the day, there might have to be some kind of accounting for it, depending how the case ends up, your Honour, then we wouldn’t have a problem with that either. We certainly do not wish to cause hardship - - -
…
MR EHRLICH: … So those are the circumstances, your Honour. If my learned friend was prepared to give an undertaking about the title deeds and perhaps, if I might suggest to your Honour, if you adjourn the matter for a few minutes, I might have some discussions with Dr Hanak, and we might be able to agree a regime in those circumstances and then some further directions for the proper conduct, because what - - -
HIS HONOUR: Yes.
MR EHRLICH: - - - we are concerned about - - -
HIS HONOUR: Yes.
MR EHRLICH: - - - is preservation of the trust property, and if that can be achieved in the circumstances where there’s a putting off of the investigations of resulting trust until we finally know that there is, in fact, no trust deed, then I wouldn’t be opposed to that proposition, your Honour, if my learned friend was to put that proposition to your Honour.

Following an extended discussion of a trial date, and what might be dealt with at trial, counsel for the receivership applicants said this:

MR EHRLICH: That leaves only the two things - - -
HIS HONOUR: Yes.
MR EHRLICH: - - - outstanding, if I may, your Honour, which is the title deeds and if my learned friend was simply — and I raise this in open court to give an acknowledgement that if, at the end of the day, the court was to determine the payments made to the first defendant in the interim period ought not to have been made, that there would be some kind of adjustment in relation to the resulting trust case, but it seems to me that that’s — that’s a way of dealing with it, your Honour - - -
HIS HONOUR: Yes.
MR EHRLICH: - - - and if my learned friend is able to deal with it on that way, we don’t even seek a cap, your Honour. Our concern is to make sure that the trust deed — that the title deeds are secure.

His Honour then stood the matter down briefly. When the hearing resumed, the following exchanges occurred:

[HIS HONOUR:] Yes. So what's the position, Mr Ehrlich?
…
MR EHRLICH: … My learned friend is going to within seven days — and I will let my learned friend speak for himself in a moment. They’re going to deposit the trust deeds.
DR HANAK: Title deeds.
MR EHRLICH: The title deeds, your Honour. I wish it was the trust deeds. The title deeds to all of the properties other than Glen Iris, which are subject to a mortgage and therefore not in their possession. They are — and my learned friend will acknowledge that.
HIS HONOUR: So they’re going to be deposited - - -
MR EHRLICH: With the court.
HIS HONOUR: With the court. Yes.
MR EHRLICH: So all the title deeds other than Glen Iris, which is subject to a mortgage.
HIS HONOUR: Yes.
MR EHRLICH: My learned friend’s client will continue to receive the income, subject only to an acknowledgement from my learned friend, which he will make on transcript in a moment, that it will be subject to some form of adjustment, depending upon the result of the case.

Counsel for the defendants to the receivership application then addressed the Court, as follows:

DR HANAK: … The title deeds to the Carlton and Balwyn properties as referred to in the affidavit material will be delivered to the prothonotary within seven days, and we will incorporate that into an undertaking by the first defendant to do that. She’s in possession of the title deeds.
And I am instructed to acknowledge that the income paid from the trust between now and the trial date, which is, I’m told, likely to be fairly modest, if there’s need to be an accounting for that at the end of the proceeding, then the first defendant is comfortable with that occurring.

HIS HONOUR: Very well. Thanks.

DR HANAK: So the only other issues will be the usual trial directions, which Mr Ehrlich and I should be able to sort out without any need for a further hearing.

Thus, ultimately, the trustee agreed to lodge with the Prothonotary the duplicate certificates of title for the Balwyn and Carlton properties, but not the Glen Iris property, and the receivership applicants agreed not to press further for the appointment of a receiver. The receivership application was resolved with no undertaking in the form of the Proposed Undertaking being sought from Ms Lee, nor given by her to the Court or to any party or person. Indeed, it was clear that the receivership applicants rejected the offer of such an undertaking.

On 10 May 2021, some 18 months after the resolution of the receivership application, Ms Lee’s solicitors, Welner Lawyers, wrote to the first respondent, who at that time was the only caveator in relation to the Glen Iris property, to inform him that Ms Lee had sold the property and to seek to have him withdraw the caveat. On 13 May 2021, the solicitors for the first and second respondents, Willocks Lawyers, responded by letter that stated that ‘[i]n principle, our clients are unlikely to have any objection to the sale of the Glen Iris property for a proper price on the open market’. They questioned why the property had been sold without consultation, and requested disclosure about the circumstances of the sale so as to satisfy themselves that a proper price had been achieved on the open market. There then followed a great deal of correspondence. It is not necessary to set out in detail all of that correspondence, but we note the following matters:

(m) On 8 June 2021, Welner Lawyers made an offer that, in return for the removal of the caveats, the proceeds of sale, less the costs of and incidental to the sale, would be retained in its trust account pending the hearing and determination of the substantive proceeding, but with provision for some amounts to be released, including $500,000 to Ms Lee.

(n) On 11 June 2021, Willocks Lawyers rejected the offer made on 8 June 2021. They noted that they were awaiting information earlier requested and stated that ‘[u]pon receipt of that information, we will in all likelihood agree to remove the caveats on condition that the proceeds of sale of the Glen Iris property … and the deposit, less proper costs of sale, are paid into court’ or into an account controlled by all the parties. They did not agree to the release of $500,000 to Ms Lee.

(o) On 15 June 2021, Willocks Lawyers offered via email to withdraw the caveats if ‘the entire proceeds of sale (after discharge of mortgage) and the deposit’ were paid into court and, noting that ‘the agent is the 3^rd defendant’ in the substantive proceeding, that there be ‘no deduction for agent’s fee or commission’. On 16 June 2021, Welner Lawyers rejected that offer.

(p) Also on 15 June 2021, the solicitors for the third respondent (who is the fourth defendant in the substantive proceeding), Robinson Gill, wrote to Welner Lawyers stating that the third respondent registered his objection to the sale of the Glen Iris property and Ms Lee’s ‘unwillingness to secure the proceeds’. They informed Welner Lawyers that they would proceed to register a caveat over the Glen Iris property and that the caveat would not be withdrawn unless the proceeds were to be paid into court or a suitable trust account, as per the email from Willocks Lawyers on 15 June 2021.

(q) On 16 June 2021, Willocks Lawyers reiterated their conditions for the withdrawal of their clients’ caveats, but then appeared to seek to have the whole of the proceeds of sale paid into court, with no allowance for the discharge of the mortgage. Robinson Gill wrote in similar terms that same day.

(r) On 16 June 2021, Welner Lawyers sent an email to Robinson Gill, copied to Willocks Lawyers, setting out Ms Lee’s position as follows: the third respondent would withdraw his caveat, and the ‘nett proceeds’ of sale would be held by Welner Lawyers in trust, to be released only by agreement of the parties or court order. ‘Nett proceeds’ were identified as the purchase price, less the discharge of the mortgage, the selling agents costs and commissions, legal fees of the conveyance and PEXA fees. This email made no mention of a payment of $500,000 to Ms Lee.

Further correspondence ensued, and no resolution was reached. What is apparent from the correspondence, however, is that the caveators did not object to the property being sold, so long as the sale was for a proper market value. By the end of the correspondence, that no longer seemed to be in issue. Rather, there were two outstanding issues:

(s) where should the proceeds of sale be held after settlement (in court, in a ‘controlled money account’, or in Welner Lawyers’ trust account?); and

(t) what amounts were to be deducted from the proceeds prior to them being paid into a suitable account, in particular were the agent’s fees and commission to be deducted?

Following the breakdown of discussions, Ms Lee made her application for removal of the caveats. In that proceeding she offered an undertaking to pay the net proceeds of sale, after discharge of the mortgage and usual sale expenses, into court. In oral argument before us she offered a similar undertaking: that ‘the proceeds of sale net of usual sale expenses will be preserved in a solicitor’s trust account, or if need be paid into Court’.

The decision below

Before the primary judge it was common ground that, on an application to remove a caveat, it is for the caveator to satisfy the Court that the caveat should be maintained, and that the test for maintaining a caveat is akin to the test for granting an interlocutory injunction to the caveator.[3] That is, a caveator must show first that there is a prima facie case that it has the estate or interest claimed in the caveat, and secondly that the balance of convenience favours the maintenance of the caveat until trial.[4] It was also common ground that there was a serious issue to be tried as to whether the caveators had a caveatable interest in the Glen Iris property. Thus the outcome of the caveat removal application fell to be determined by reference to balance of convenience considerations.
[3]Piroshenko v Grosjman (2010) 27 VR 489, 491–5 [7]–[23]; [2010] VSC 240 (‘Piroshenko’).
[4]Piroschenko (2010) 27 VR 489, 491 [7]; [2010] VSC 240; Carbon Black Lab Pty Ltd v Launer [2015] VSCA 126, [35] (‘Carbon Black’).

Before turning to the question of where the balance of convenience lay, the judge made the following observations:

In the context of the submissions, both oral and written made by both counsel, and the proposed undertaking which was annexed to the written submissions filed on behalf of Ms [Lee] — that Ms Lee would not deal [with] the Glen Iris property, it is plain that the reason why the Title deeds for the Glen Iris property were not included in the undertaking, the Title deeds to be lodged with the prothonotary, was because these deeds were in possession of the ANZ Bank.
The primary issue underpinning the plaintiff’s application of the appointment of a receiver was the risk the trust property would not be preserved. The undertaking which Ms Lee proposed to give in respect of the Glen Iris property was designed to address this concern. There was no suggestion, during the hearing on 5 August 2019, that although the Title deeds for the Glen Iris property were not being lodged with the prothonotary, that there was any risk that Ms Lee would take steps to sell the property.
Ms Lee’s subsequent conduct in entering into [a] contract for [the] sale of the Glen Iris property is therefore inconsistent with the basis upon which the plaintiffs in the substantive proceeding agreed not to press their application for the appointment of a receiver.[5]

[5]Reasons 60–1.

Before the judge, Ms Lee submitted that a significant consideration relevant to the assessment of the balance of convenience was her preparedness to pay into court any surplus funds from the sale of the Glen Iris property after the discharge of the mortgage and the payment of legal fees and the agent’s commission and costs. She also submitted that, from a practical perspective, the caveators would not be prejudiced in the substantive proceeding by allowing the sale to proceed and the surplus funds to be paid into court. She submitted that if the caveators succeed in the substantive proceeding then the likely outcome will be the sale of the Glen Iris property and the distribution of funds to the defendants. Further, she submitted that if the amount which would have been realised if the sale of the Glen Iris property did not take place until after the conclusion of the substantive proceeding is greater than the amount paid into court, then the caveators would have the right to claim equitable compensation for the difference.

In relation to those submissions, the judge said this:

Viewed in isolation these submissions have force; however, it is necessary to include in the assessment of a balance of convenience consideration of Ms Lee’s conduct in entering into a contract of sale of the Glen Iris property in light of the resolution of the plaintiff’s application for the appointment of a receiver in the substantive proceeding.[6]

[6]Reasons 62.

He then made the following observations:

I consider it extremely unlikely that the plaintiffs would have resiled from their application for the appointment of a receiver on the basis of the Title deeds for the Carlton and Balwyn trust properties being lodged with [the] prothonotary if there was any prospect that Ms Lee would subsequently have been free to proceed with the sale of the Glen Iris property.
The gravamen of the resolution of the application for the appointment of a receiver was that the properties subject of disputation in the substantive proceeding, namely the trust properties in Carlton and Balwyn and the Glen Iris property, would not be dealt with until the hearing and determination of the substantive proceeding.[7]

We refer to the second quoted paragraph as the ‘gravamen finding’.

[7]Reasons 62.

In light of those observations, his Honour held as follows:

The balance of convenience strongly favours the maintenance of the status quo in the immediate aftermath of the resolution of the application for the appointment of a receiver. That status quo requires the Glen Iris property not to be sold unless the caveators agree of their own volition to remove the caveats which have been lodged on the Title.[8]

[8]Reasons 63.

Ms Lee had also submitted that the financial prejudice which she may suffer as a result of the sale of the Glen Iris property not proceeding is a matter relevant to the balance of convenience. In relation to that submission, the judge said as follows:

Ms Lee sold the property without providing any notice to the defendants. Any adverse financial consequences are of her own making. Not only did Ms Lee provide no notice of the sale, the sale of the property is inconsistent with the submissions advanced on her behalf in resisting the application for appointment of a receiver.
These matters militate against any potential financial prejudice arising from the non-completion of the sale, being matters weighing significantly in determination of the balance of convenience.[9]
[9]Reasons 63.

The proposed grounds of appeal

Ms Lee relies on three proposed grounds of appeal, as follows:

(1)The learned primary Judge erred in assessing the balance of convenience by treating as decisive, alternatively by giving substantial weight to, a factor which did not on proper analysis bear upon the balance of convenience. That factor was a proposed undertaking not to deal with the relevant property, which was at one point proposed as a means of resolving a receivership application in a separate proceeding, but which was not given or accepted in that proceeding and was therefore never operative.
(2)The learned primary Judge erred by speculating as to the significance or role of the Earlier Proposed Undertaking in resolution of the receivership application, despite there being no evidence of it having had any such significance or role.
(3)Even if the Court is not persuaded by either or both of the above grounds that there has been a specific identifiable error in the process of the learned primary Judge’s reasoning, the result below is so unreasonable or plainly unjust that it is to be inferred that in some way there has been a failure properly to exercise the discretion.

It is apparent that grounds 1 and 2 are framed as allegations of specific error, whereas ground 3 is an allegation of a residual House v The King[10] error.
[10](1936) 55 CLR 499; [1936] HCA 40.

The application for an extension of time

As noted above, Ms Lee has sought an extension an extension of time to file her application for leave to appeal. This application is opposed by the caveators.

Ms Lee’s application for leave to appeal was due to be filed on Friday 6 August 2021. It was filed on Tuesday 10 August 2021, and served on Wednesday 11 August 2021. Ms Lee’s solicitor, Mr Welner, provided a brief explanation for the delay, the relevant paragraphs of which said as follows:

4.Victoria has suffered two snap lockdowns, the first from 16 July 2021 and ending on 27 July 2021, and the second from 5 August 2021 which is continuing as at the date of filing.
5.Despite the direction that face-to-face conferences can occur for the purposes of litigation, our client is over the age of 60 and would be considered high-risk should she be affected by COVID-19
6.Solicitors and Counsel for the Applicants have had serious difficulty in obtaining timely instructions from the Applicant. She suffers poor English, requiring our coordinating with her son as interpreter. During the lockdowns, our capacity to finalise filing of the application has been delayed, but filed as soon as practicably possible.

Ms Lee herself has not filed an affidavit concerning these matters.

The caveators challenged Mr Welner’s evidence, by filing detailed affidavit evidence. The third respondent Eng Hing Yap relevantly deposed, in summary, as follows:

(u) Welner Lawyers had engaged in correspondence concerning the caveats throughout an earlier lockdown, without advising of any difficulties in obtaining instructions from Ms Lee. Nor had they raised such difficulties in separate Family Court proceedings conducted during lockdowns in 2020.

(v) He is Ms Lee’s son, and lived with her from 1983 to 2000 and 2012 to 2013, and was in regular contact with her up until mid-2020. Ms Lee has resided in Australia for around 40 years and ‘is well versed in English and has proficient skills in both writing and speaking’. Ms Lee had given evidence in the substantive proceeding that she went to an English-speaking school, she taught English in Malaysia for a year and she was employed at Myer in Melbourne for a year. In the Family Court proceedings, Ms Lee indicated on relevant forms that she did not require an interpreter.

Mr Nguyen, solicitor for the first and second respondents, deposed that he had been to three mediations also attended by Ms Lee at which she had never required an interpreter, nor did she require the assistance of any of her sons as an interpreter. He also heard Ms Lee speak fluently in English at a judicial mediation. Nor was an interpreter involved in the swearing of Ms Lee’s affidavits in the substantive proceeding, or in the Family Court proceedings.

The caveators also noted that Ms Lee’s solicitors had placed the parties on notice of her intention to appeal on 28 June 2021, and that further correspondence concerning the proposed appeal was sent by her solicitors on 13 July 2021 and 23 July 2021. This correspondence was sent during the lockdowns, without any apparent difficulty.

Ms Lee’s application for an extension of time within which to apply for leave to appeal is made under r 64.08 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’). The underlying object of that rule is to provide to the Court a discretion to extend time with a view to avoidance of an injustice.[11] In Kambouris v Kiatos,[12] McLeish JA and Riordan AJA identified the principal relevant factors that are ordinarily taken into account on such an application in the following terms:

In deciding whether an extension of time to seek leave to appeal should be granted, the Court will take into account several factors, including: (a) the length of delay; (b) the reasons for delay; and (c) the extent of any prejudice suffered by the respondent if the extension is granted. An extension of time will not be granted if the appeal ‘is so devoid of merit that it would be futile to do so’.[13]

[11]Hughes v National trustees Executors and Agency Co of Australasia Ltd [1978] VR 257, 262–3 (‘Hughes’).

[12][2016] VSCA 266.

[13][2016] VSCA 266, [23] (citations omitted). See also Gippsreal Ltd v Kenny [2016] VSCA 65, [21]; Hewitt v Count Financial Ltd [2017] VSCA 354, [20] (‘Hewitt’).

The exercise of the discretion to extend time must be undertaken taking into account that the overarching purpose of the Rules is to facilitate ‘the just, efficient, timely and cost effective resolution of the real issues in dispute’.[14] It is also relevant that, upon the expiry of the time limited for the appeal, a successful litigant has an interest in knowing that a claim has been determined with finality.[15]
[14]Civil Procedure Act 2010 s 7(1); Hewitt [2017] VSCA 354, [21].
[15]Hughes [1978] VR 257, 263.

In the present case, these factors pull in different directions. On the one hand, the length of the delay in filing Ms Lee’s application was very short, being four days (and only two business days). For that reason it might be said that there is no real prejudice to the caveators in the grant of an extension of time.

On the other hand, of real significance and concern in the present case is that the explanation given for the delay is unsatisfactory, particularly given the evidence of Mr Yap and Mr Nguyen, which was not answered. Further, while the ‘lockdown’ from 16 June to 27 July 2021 might have made the obtaining of instructions more difficult, the unchallenged evidence is that Ms Lee’s solicitors obtained instructions to appeal by 28 June 2021 and engaged in correspondence concerning the caveats in the course of the lockdown period. And in so far as Ms Lee sought to rely on the ‘lockdown’ that commenced on 5 August 2021, the application for leave to appeal was due to be filed only one day after that; thus it is not credible that that lockdown was a reason for the delay. Her counsel accepted as much at the hearing, although he submitted that it was relevant to the length of the delay.

If a time limit for the filing of court documents is not met, and an application is made for an extension of time, a legal practitioner who swears an affidavit in support of the application must ensure that the affidavit contains a frank and thorough explanation for the delay.[16] Such an explanation is required to assist the court to determine who is responsible for the delay and whether there is a satisfactory explanation for it. That is so even where the delay is short. Parties should not assume that there will invariably be a grant of an extension of time if the delay is short. Regrettably, the affidavit sworn by Mr Welner in the present case does not contain all the information required by the Court. No specific details were given explaining what steps could not be taken during the relevant lockdown, why those particular steps could not be taken over a videolink or by telephone, and why they could not be taken in the period immediately after that lockdown had ended, prior to the due date. Further, no specific occasions were identified when, although instructions were needed from Ms Lee, they could not be obtained due to her need to rely on her son as interpreter (even putting to one side the contradictory evidence in this regard). Ultimately, we consider the explanation for the delay to be entirely unsatisfactory.
[16]Longleyv The Queen [2021] VSCA 288, [13].

Finally, it is necessary to consider the merits of the appeal, which will be a significant factor. In our opinion the merits of the appeal are sufficiently strong to overcome the deficiencies in the explanation for the delay, for the reasons that follow.

The merits of the proposed appeal

Ms Lee’s written submissions

In support of ground 1, Ms Lee submitted that the judge erred in his assessment of the balance of convenience. She relied upon the principle articulated in Bradto Pty Ltd v Victoria that, in assessing the balance of convenience on an application for an interlocutory injunction, a court should take whichever course appears to carry the lower risk of injustice if it should turn out the court was ‘wrong’, in the sense of granting an injunction to a party who does not succeed at trial, or in failing to grant an injunction to a party who does succeed at trial.[17] By analogy, she submitted, the same approach applies in relation to an application for the removal of a caveat.[18]
[17](2006) 15 VR 65, 73 [35]; [2006] VSCA 89 (’Bradto’).
[18]Piroshenko (2010) 27 VR 489, 497 [38]; [2010] VSC 240.

Ms Lee submitted that the judge did not embark upon that inquiry. Rather, she submitted, his Honour ‘focussed substantially, if not entirely, on what His Honour considered to be the applicant’s authorship of the circumstances facing the Court at the time of the hearing before His Honour, and ignored the possibility that the applicant may be vindicated at trial’. She observed that it may be that the caveators are unable to establish their interest in the Glen Iris property at trial, or that their interests may justify no relief beyond a sale of the property, which would not justify restraint of the sale presently on foot.

Further, Ms Lee contended that the Proposed Undertaking (and any purported reliance upon it by the caveators) was immaterial to the proper assessment of the balance of convenience. First, she observed, no undertaking in that form was ever given by her, or received by the Court, or relied upon by the caveators. She further submitted that, even if such an undertaking had been given, received and relied upon, it could have had no bearing on the harm which would be suffered either by her if the caveats remained on the title, or by the caveators if they were removed. Ms Lee contended that the judge erred in attaching any significance to it.

Ms Lee contended that the practical matters she had identified concerning the sale of the Glen Iris property were ‘powerful considerations which warranted careful consideration’. In her submission, those considerations meant that the balance of convenience was ‘all one way’, because:

(w) if the caveats were not ordered to be removed, and it turned out that this was the ‘wrong’ decision (in the Bradto sense), she would suffer real and substantial harm, namely damages, agent’s fees and costs for which she would very likely go without recompense (noting that the caveators did not give an undertaking as to damages[19]);

(x) by contrast, if the caveats were ordered to be removed, and it turned out in due course that this was the ‘wrong’ decision (in the Bradto sense), the caveators would nonetheless be unlikely to suffer material harm. In light of the undertaking proffered, the net proceeds of the sale of the Glen Iris property would be in court, and would be amenable to whatever orders may be made in favour of the caveators in the substantive proceeding if they succeed in their claims.

[19]We note that the first and second respondents offered an undertaking as to damages, whereas the third respondent did not. The judge said he did not consider it ‘necessary or appropriate’ to require an undertaking as to damages: Reasons 63.

Ms Lee submitted that the judge failed to properly consider these matters; or, alternatively, if he did consider them, his reasons do not reflect that, which is itself appellable error.[20]
[20]Fletcher Construction Australia Ltd v Lines MacFarlane & Marshall Pty Ltd (2002) 6 VR 1, 30–4 [99]–[106]; [2002] VSCA 189.

At the hearing, Ms Lee’s case shifted somewhat. She contended that the judge had erred in focusing on preservation of the status quo in determining the balance of convenience, because the very question to be determined in a hearing for removal of a caveat is whether the balance of convenience justifies departure from the status quo.

She further contended that the judge erred in treating the resolution of the receivership application as an aspect of the balance of convenience. While she accepted that it might have been open to the judge to take into account matters other than those identified by the Bradto test, she submitted that the judge included those other matters as being part of the balance of convenience, which was an error.

In support of ground 2, Ms Lee submitted in her written case that the judge found that the plaintiffs in the substantive proceeding (who, whilst not in complete identity with the caveators, were partly so and otherwise in a similar interest) had relied upon the Proposed Undertaking in their decision to discontinue the receivership application made by them in that proceeding. She submitted that his Honour expressed his finding in this way:

‘[T]he proposed undertaking which was annexed to the written submissions filed on behalf of Ms — that Ms Lee would not deal with the Glen Iris property’ … [mitigated] ‘any risk that Ms Lee would take steps to sell the property’ … [as] ‘the basis upon which the plaintiffs in the substantive proceeding agreed not to press their application for the appointment of a receiver’.

She described this as the ‘Reliance Finding’. She submitted that there was no evidence to support this finding. She further submitted that, in the absence of evidence to the contrary, the only natural inference to be drawn from the caveators’ conduct — namely, not seeking that Ms Lee give the Proposed Undertaking as part of resolving the application for the appointment of a receiver — was that they placed no reliance upon it. Thus there was, she submitted, no sound basis upon which the judge was able to make the Reliance Finding.

Ground 3 is a House v The King allegation of residual error. In relation to this ground, Ms Lee submitted that, in light of the existence of the contract of sale and the impact of its rescission on Ms Lee, in contrast with the lack of prejudice to the caveators in allowing the sale to proceed, ‘there was only one outcome of the proceeding below which upon the facts was both reasonable and just’. She contended that, had the judge correctly analysed the balance of convenience, ‘that must have resulted in a determination that the balance was all one way in favour of the applicant, or so overwhelmingly so that the Court’s discretion must be exercised in her favour’. Thus, she submitted, the judge’s failure to so exercise the discretion was a ‘substantial wrong’ of the kind identified in House v The King.

At the hearing Ms Lee submitted that the gravamen finding was not correct, and that this had led his Honour into error. That submission had not been clearly articulated in her written case. That submission was said to fall within ground 2. In short, Ms Lee submitted that the receivership application had been resolved in the terms presented to the Court: the deposit of the title deeds to the Balwyn and Carlton properties with the Prothonotary, and the acknowledgement that an accounting for trust distributions to Ms Lee might be required at the conclusion of the substantive proceeding. In relation to the Glen Iris property, the caveators retained their caveats as the only protection of that property. She submitted that someone who relies on a caveat knows that if it is challenged, the caveator must justify the caveat, and that that was the position the day before the receivership application and the day after the receivership application. That is, the resolution of the receivership application did not alter the status quo in relation to the Glen Iris property.

Ms Lee submitted that the gravamen finding was impressionistic or speculative, because his Honour did not know the basis on which the parties had reached their agreement as to the manner in which the receivership application was to be resolved. She pointed out that it was not said to his Honour that the Glen Iris property would not be sold. Ms Lee’s evidence concerning her intention in relation to the trust property was not a promise. The proffered undertaking was rejected. Thus the resolution of the receivership application left open the possibility that at some future time the property would be sold. Ms Lee pointed out that the caveators had been legally represented. They had not adduced any evidence as to what they would have done had they known that she might seek to sell the Glen Iris property. She submitted that the only inference that could reasonably be drawn was that the caveators were content with the protection they obtained from the outcome of the receivership application, and that one could not go beyond that and infer that some other, implied protection was given, when that other protection had been offered but not accepted. Thus the gravamen finding was, she contended, simply not open as a finding. It was speculation.

Ms Lee addressed the possibility that, even if it could not be said that the parties had agreed that the Glen Iris property would not be sold, by reason of the way in which the receivership application was resolved, the caveators had a well-founded reason to believe that there could be no sale of the property pending the determination of the substantive proceeding. She submitted that there was, again, no evidence to support a finding of that kind.

Ms Lee also submitted that the judge did not identify, or rely upon, any prejudice that would be suffered by the caveators if the Glen Iris property were to be sold and the proceeds paid into a suitable account or into court. Nor had the caveators relied upon a notice of contention, or otherwise sought to identify any prejudice that they might suffer. In that regard, she pointed out that initially there had not been a dispute as to whether the property should be sold, rather there was a dispute as to what was to be done with the proceeds. That position shifted only at the ’eleventh hour’.

Finally, Ms Lee pointed to the fact that the caveators had sought, in the substantive proceeding, to have the Glen Iris property sold. Thus, removal of the caveats to enable a sale, coupled with the protection of the proceeds of sale, was entirely consistent with that.

The caveators’ submissions[21]

[21]The first and second respondents filed a joint written case, and the third respondent filed a separate written case. However, each of them resisted the application for leave to appeal; and unsurprisingly, there is a considerable overlap between them. Further, at the hearing the third respondent largely adopted the submissions of the first and second respondents. It is not necessary to differentiate between the two sets of submissions; rather, we shall simply refer to the caveators’ submissions, regardless of precisely which party made which submission, unless it is necessary to do otherwise.

As to ground 1, the caveators contended that the proposition that the judge failed to embark upon a consideration of the balance of convenience must be rejected, because the judge was told that the case turned only on that issue. It is thus clear that his Honour understood his task as being to determine where the balance of convenience lay. Further, the caveators submitted that it is not for this Court to decide where the balance of convenience lies. Rather, the judge’s decision is to be assessed in accordance with House v The King principles.[22]
[22]Bradto (2006) 15 VR 65, 81–2 [81]; [2006] VSCA 89.

The caveators further contended that, contrary to Ms Lee’s submissions, the ‘lower risk of injustice’ test, articulated in Bradto, is not directed to the balance of convenience. Rather, it is concerned with the exercise of discretion as to whether to grant the relief sought. That exercise, the caveators submitted, occurs after the two-stage test applicable to an application for an injunction has been considered[23] — that ‘two-stage test’ being a consideration of the strength of the applicant’s case together with and as part of the overall assessment of the balance of convenience’.[24] They also submitted that the lower risk of injustice test has regard to the strength of the applicant’s case.[25] The caveators observed that there was no issue before the judge as to the existence of a prima facie case, nor as to its strength, and that ‘the stronger the case, the easier the balance is to satisfy’ in favour of the caveators.[26]
[23]Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; [2006] VSCA 46.
[24]Optus Networks Pty Ltd v Stonnington City Council (1996) 2 VR 209, 213.
[25]Bradto (2006) 15 VR 65, 74 [39], 74–5 [41]; [2006] VSCA 89.
[26]Royal Melbourne Institute of Technology v Galloway [2020] VSC 575, [17].

As to whether the judge ‘embarked upon’ an assessment of the balance of convenience, the caveators submitted that he did so, and that he took into account a range of factors, both for and against the maintenance of the caveats, including:

(y) the potential financial prejudice to Ms Lee if she cannot perform the contract of sale;

(z) that the Glen Iris property is claimed as a trust asset and is subject to dispute in the substantive proceeding;

(aa) that preserving the Glen Iris property (and other real property) had been the object of the application for the appointment of a receiver to the trust in 2019;

(bb) that at the time of the hearing of the receivership application there was ‘no suggestion … that there was any risk that Ms Lee would take steps to sell the property’;

(cc) that the receivership application was resolved by the deposit of certificates of title to two of the three properties with the Prothonotary;

(dd) that Ms Lee’s entry into a contract for a sale of the Glen Iris property was ‘inconsistent with the basis upon which the plaintiffs in the substantive proceeding agreed not to press their application for the appointment of a receiver’ and ‘inconsistent with the submissions advanced on her behalf in resisting the application for appointment of a receiver’; and

(ee) that Ms Lee entered that contract ‘without providing any notice to the caveators’.

The caveators also submitted that the judge’s focus on the Proposed Undertaking was relevant to two aspects of the Court’s decision: first, it was said to evidence a ‘clear recognition by the applicant of the strength of the case against her’; and second, it evidenced a ‘clear recognition by the applicant that in order to preserve the status quo and demonstrate that the assets of the trust were not in jeopardy, she needed to proffer the undertaking’ not to sell the Glen Iris property.

In relation to the manner in which the receivership application was resolved, the caveators submitted as follows:

The receivership application resolved on the basis, not of the proffered undertakings being given, but on the basis that the titles to the trust properties were to be lodged with the court, other than the title to the Glen Iris property which was mortgaged to the ANZ Bank who held the title. In these circumstances the caveats on the title to the Glen Iris property operated as in effect an injunction preventing its sale. The existence of the caveats on the title to the Glen Iris property was acknowledged by [Ms Lee].
Counsel for the first respondent (as applicant for the appointment of a receiver) rejected the proffered undertakings and asked for the titles to be taken into the court’s custody instead.
It should be inferred that the effect of the caveats was an operative consideration in the compromise of the receivership application and it should not be inferred that the first respondent (as applicant for the receiver) failed to have regard to the preservation of the status quo with respect to the Glen Iris property.
When his Honour observed that [Ms Lee] would be the author of her own loss if the caveats were not removed, he was discounting the weight to be given to her exposure to claims from the purchaser and the loss of her selling costs. In the balance, those self-induced matters weighed little against the consequences for the respondents of the loss of a significant trust asset should the caveats be removed.

Thus, it was submitted, the Proposed Undertaking was central to how the status quo in the substantive proceeding came about, in the aftermath of the resolution of the receivership application. Further, the caveators submitted that when considering the balance of convenience, it was highly relevant that the alleged adverse financial consequences to Ms Lee were brought about by her willingly disrupting that status quo.

At the hearing, the caveators further submitted that a significant reason for declining to remove the caveats was the fact that Ms Lee had no power to sell the Glen Iris property free of the resulting trusts by which it was bound. When pressed to identify where in his Honour’s reasons he had had regard to that matter as a reason for declining to order that the caveats been removed, the caveators pointed to those passages where his Honour held that Ms Lee had given no notice of the sale and had brought the consequences on herself.

In response to the proposition that the judge had not identified any prejudice to the caveators if the caveats were to be discharged, the caveators pointed to the submissions they had put to his Honour in that regard, as follows:

(ff) that their beneficial interest in the Glen Iris property would be destroyed;

(gg) that the property may be more valuable in the future, given that there is a ‘rising market’ (although they accepted no evidence of that was put to his Honour);

(hh) that the caveators should not have to be put in the position of seeking equitable compensation if it turns out that the property would have been more valuable at the time of judgment in the substantive proceeding than at the time of impugned sale; and

(ii) that the beneficiaries of the resulting trusts would lose the option of being able to elect to retain the property by agreement between them.

The caveators also submitted that the judge was correct to make the gravamen finding, although they contended that it was not a finding of fact, but rather ‘a comment about the state of play in the receivership application’; but not speculation. That was because the caveators had not set out to prove that the first respondent would have pressed the receivership application if Ms Lee would otherwise have been free to proceed with the sale of the Glen Iris property. But they contended that the presence of the Proposed Undertaking demonstrated a clear acknowledgment by Ms Lee that the status quo — namely that the Glen Iris property would not be sold — was to be preserved pending the outcome of the substantive proceeding. In that regard, they submitted that it was implicit that, unless the caveators agreed, the caveats would not be removed by the Court.

As to ground 2, the caveators submitted that the judge did not make the ‘Reliance Finding’ as formulated by Ms Lee. They submitted that ‘finding’ is comprised of fragments of three separate sentences scattered across three paragraphs of the transcript of the judge’s reasons. They submitted that that is not a proper approach to the judge’s reasons.[27] They submitted that his Honour did not, expressly or by necessary implication, infer any reliance by the caveators on the Proposed Undertaking as part of his process of reasoning.
[27]Lewis v Lewis [2021] NSWCA 168, [84].

In relation to ground 3, the caveators submitted that Ms Lee failed to identify why the decision below is unreasonable or plainly unjust so that unidentified or non-specific error is to be inferred. In relation to Ms Lee’s submission that the judge’s failure to exercise the discretion in her favour is a ‘substantial wrong’ because, had his Honour properly analysed the balance of convenience in accordance with established principles, he would have determined that it was ‘all one way in the applicant’s favour or overwhelmingly so’, they submitted that did not provide this Court with any basis to infer error.

In addition, they submitted that the relevant circumstances were not such that there was ‘only one outcome’ open. They submitted that the preservation of the status quo was justified by a range of matters, as follows:

(jj) the Glen Iris property was bought as an asset of the trust in 1992;

(kk) at the time that the trust failed, the third respondent was a trust beneficiary and had made contributions to assets held on trust by the trustee;

(ll) the third respondent is a beneficiary of the one or more resulting trusts on which the trust assets and his trust contributions are currently held;

(mm) the trustee transferred the Glen Iris property to the applicant in July 2005 for no consideration;

(nn) there was no evidence that the trustee — which was a bare trustee at the time — had power to appoint the Glen Iris property in the applicant’s favour or had been validly directed to do so;

(oo) as a director of the trustee at the time, the applicant acquired the Glen Iris property from the trustee in apparent breach of the fiduciary self-dealing rule, yet she made no endeavour to prove that the transfer was fair and for full value;

(pp) the receivership application had been brought to preserve the status quo and had been resolved on a basis that would preserve the status quo pending the trial;

(qq) settlement of the applicant’s sale of the Glen Iris property now, without the caveators’ consent, would rupture the status quo before the issues in the substantive proceeding have been heard and determined.

The caveators submitted that Ms Lee’s submissions artificially narrowed the range of considerations relevant to the exercise of the court’s discretion under s 90(3) of the Transfer of Land Act.

Consideration

78 Section 90(3) of the Transfer of Land Act permits any person adversely affected by a caveat to ‘bring proceedings in a court against the caveator for the removal of the caveat’ and empowers the court dealing with such an application to ‘make such order as the court sees fit’. As this Court observed in Carbon Black, the court’s power under s 90(3) is discretionary; thus an applicant who seeks leave to appeal against an exercise of that discretion must establish error of the kind identified in House v The King.[28]

[28][2015] VSCA 126, [39]. See also AE Brighton Holdings Pty Ltd v UDP Holdings Pty Ltd [2020] VSCA 235, [27].

In Carbon Black, this Court held that when a court is considering an application under s 90(3), the court applies the two-stage test used for determining an application for an interlocutory injunction.[29] The Court approved the following passage from Warren CJ’s judgment in Piroshenko:

Caveats under the Torrens system are treated by the courts as analogous to applications for interlocutory injunctive relief. In so far as their registration is an administrative act, it is when application is made for their removal that the onus falls on the caveator to satisfy the two-stage test used by the court when deciding whether to exercise its discretion to grant interlocutory injunctive relief. … This two-stage approach requires the caveator to establish that there is a serious question to be tried that they have the estate or interest which they claim in the land in question, and having done so, to establish that the balance of convenience favours the maintenance of the caveat on the Register of Titles until trial.[30]

[29][2015] VSCA 126, [35]. See also Chan v Liu [2020] VSCA 28, [42] (‘Chan’).

[30](2010) 27 VR 489, 491 [7]; [2010] VSCA 240.

Further, an application for removal of a caveat does not ordinarily present an occasion for the final determination of disputed factual issues or of the claims which the caveat seeks to protect.[31] Given that, we reject the caveators’ submission that one of the factors that the judge considered in resolving whether to order the removal of the caveats was the proposition that Ms Lee has no power to deal with the Glen Iris property free of the resulting trusts. First, there is simply no indication in the judge’s reasons that he made any such finding. Had he done so, one would expect him to have said so clearly. His references to Ms Lee proceeding without notice and having brought the circumstances upon herself cannot, in our view, be read as indicating that his Honour had made a finding of this kind. Second, for him to have done so would have been to enter into a resolution of the underlying dispute, which is not generally appropriate on an application to remove a caveat.
[31]See McMahon v McMahon [1979] VR 239, 245–6, and the authorities there discussed.

We turn now to the particular grounds of appeal.

Ground 1 in terms alleges two alternative specific errors by the judge, namely that his Honour erred in either:

(rr) treating the Proposed Undertaking as decisive in his assessment of the balance of convenience; or

(ss) giving substantial weight to the Proposed Undertaking when it did not, on proper analysis, bear on the balance of convenience.

Before evaluating these allegations, it is necessary to identify more precisely how the judge dealt with the Proposed Undertaking. First, it is plain that the judge was aware that the Proposed Undertaking was never given to the Court or to any person. That is why he referred to it as the ‘proposed undertaking’. However, that it had been proposed was a fact known to the Court; and it was a fact that was relevant to understanding the way in which the receivership application came to be resolved, which was by an arrangement that was designed to preserve the status quo without the need for the appointment of a receiver. In that sense we do not consider that it can be said to be legally irrelevant to the resolution of the application to remove the caveats.

As to the first proposition contained in ground 1, we do not think it can properly be said that the judge treated the Proposed Undertaking as ‘decisive’. Rather, his Honour treated as significant the manner in which the receivership application had been resolved. As noted above, the Proposed Undertaking was but one of the background facts relevant to that resolution.

As to the second proposition contained in ground 1, in our view it proceeds on a mistaken understanding of the matters that can permissibly be considered by a court when dealing with an application to remove a caveat under s 90(3) of the Transfer of Land Act. The authorities make clear that, although the courts have adopted the two stage test, s 90(3) is drafted broadly, and enjoins the court to make such orders as it thinks fit. Thus the two-stage test can only inform the court in considering whether to exercise the discretion conferred on it in any particular case and, if it chooses to do so, what form that exercise should take. The two-stage test does not subsume or restrict the power conferred by the statute.[32] Nor, in our view, when a court is considering the balance of convenience on an application for removal of a caveat, is the court confined as to the matters it may consider as going to the balance of convenience. Thus we reject Ms Lee’s argument that, even if it was permissible for the judge to consider the resolution of the receivership application, it was not permissible for him to do so as part of his analysis of the balance of convenience. That would be to artificially circumscribe the judge’s exercise of discretion.
[32]Carbon Black [2015] VSCA 126, [36], referring to Piroshenko (2010) 27 VR 489, 491–2 [11]; [2010] VSCA 240. See also Chan [2020] VSCA 28, [43].

Thus, in assessing the balance of convenience it was, in our opinion, open to the judge to have regard to the manner in which the receivership application was resolved and the assumptions that underpinned that resolution. Those matters — including, but not limited to, the Proposed Undertaking as one of the underlying facts — were not irrelevant to the decision that the judge was called upon to make under s 90(3). Similarly, in light of the authorities discussed above, the ‘Bradto test’ does not confine the statutory discretion in the manner advanced by Ms Lee.

For these reasons, we do not consider that ground 1 is made out.

We turn now to ground 2, which, as we have already stated, is in the following terms:

The learned primary Judge erred by speculating as to the significance or role of the Earlier Proposed Undertaking in resolution of the receivership application, despite there being no evidence of it having had any such significance or role.

In Ms Lee’s written case she supported ground 2 by relying on what she termed the ‘Reliance Finding’. As noted above, this is said to be a ‘finding’ by the judge as to the reliance placed on the Proposed Undertaking by the caveators. However, as the caveators point out, the ‘Reliance Finding’ is a series of phrases stitched together from different paragraphs in the judge’s reasons. That is a quite inappropriate manner in which to identify a finding. We do not accept that the judge made a finding in the terms set out in the ‘Reliance Finding’.

However, as indicated above, in oral argument Ms Lee’s submissions diverged somewhat from a literal reading of her grounds of appeal and her written submissions, to a more expanded approach that focused on the gravamen finding (which of course was in part based on the Proposed Undertaking). She contended that this finding was not supported by the evidence and constituted mere speculation. Ms Lee characterised this part of her submissions as going to ground 2. While there was no application to amend the proposed grounds of appeal, we accept that ground 2 is sufficient to encompass this submission. There was no real objection to Ms Lee putting her case in that way. The caveators had an opportunity to respond and did so. They did not suggest that they were prejudiced in any way.

In our view ground 2, understood in this way, must succeed. Ms Lee was correct to identify error in relation to the gravamen finding. That finding, on its face, can be understood potentially in two different ways, as Ms Lee accepted in her submissions:

(tt) First, it could be understood as a finding that the parties had agreed to resolve the receivership application on the basis that the Glen Iris property would not be dealt with prior to the determination of the substantive proceeding.

(uu) Second, it could (perhaps) be understood as a finding that Ms Lee’s conduct of the receivership application, including the evidence and submissions she had filed, had induced the receivership applicants to believe that the Glen Iris property would not be dealt with prior to the determination of the substantive proceeding, and that was the basis on which they agreed not to pursue their application.

The question, then, on the appeal, is whether it was open to the judge to find either that the parties had agreed in the manner identified, or that Ms Lee had induced the receivership applicants to believe that that was the basis of the resolution of the receivership application.

Having examined the affidavit material filed by Ms Lee prior to the hearing of the receivership application, Ms Lee’s written submissions, and the transcript of the hearing of that application before the judge, which is set out in some detail above, we do not consider it was open to the judge to find that the parties to the receivership application had agreed that the Glen Iris property would not be dealt with prior to the determination of the substantive proceeding. There was simply no evidence suggesting an agreement of that kind. In fact, the rejection by the receivership applicants of the Proposed Undertaking in relation to the Glen Iris property suggests to the contrary. Certainly no party informed the Court that there was any such agreement in relation to the Glen Iris property. Rather, the receivership application hearing was conducted in a way that suggested that the concern was not with the Glen Iris property, but with the Carlton and Balwyn properties of which the trustee was the legal owner and held the title deeds.

Thus, as can be seen in the passages extracted above, counsel for the receivership applicants told the judge on several occasions that their concern was to preserve the trust property and to secure the title deeds, in circumstances where it was plain that the title deeds to the Glen Iris property were with the bank, and so could not be secured. When the issue of the title deeds to the Balwyn and Carlton properties had been resolved, counsel for the receivership applicants told the judge that only one issue remained, and that was a statement to the Court as to the need for an accounting in relation to ongoing trust distributions to Ms Lee.

While it is true that, as the judge observed, there was no suggestion at the receivership application hearing that the Glen Iris property would be dealt with prior to trial, nor was there any suggestion that there was an agreement that it would not be so dealt with. Had there been such an agreement, one would have expected it to have been recorded or referred to at that time. However, when the Glen Iris property was mentioned in the course of the receivership application hearing, the only statements about it were that its title deed would not be lodged with the Court because it was held by the mortgagee bank. No statement was made that the property was subject to any agreement that might impose any additional limit on Ms Lee’s ability to deal with it.

Rather, what appears from the materials is that the receivership applicants withdrew their receivership application on the basis of two matters only: the lodging of the title deeds to the Carlton and Balwyn properties with the Prothonotary, and the acknowledgement concerning the trust distributions to Ms Lee. We infer that they considered that those steps were sufficient to protect their interests. In the present proceeding the first respondent (who was one of the receivership applicants) has adduced no evidence to suggest otherwise. Further, as already noted, the receivership applicants expressly chose not to accept the Proposed Undertaking in relation to the Glen Iris property.

This conclusion is further supported by the reaction of the caveators upon being informed that the Glen Iris property had been sold. They did not complain that Ms Lee had violated an agreement that they had, or believed they had, as a consequence of the resolution of the receivership application. Rather, they initially indicated that they would not object to the sale of the property, subject to being satisfied that the sale was for fair market value and that the proceeds would be protected. Ultimately, it appears that they were satisfied that the property was sold for fair market value, and the only issues on which the parties failed to agree concerned the manner in which the proceeds of sale would be dealt with. The correspondence is thus at odds with the gravamen finding.

In so far as it might be said that the manner in which Ms Lee conducted the receivership application might have induced the receivership applicants to believe that the Glen Iris property would not be sold, and that they relied upon that belief, that would be a somewhat strained reading of the gravamen finding, although Ms Lee appeared to accept that was a possible way to read his Honour’s judgment. In any event, we do not consider that such a finding was open on the materials. In our opinion, Ms Lee’s evidence and submissions (to which the judge referred) could not properly have led to such a finding.

(vv) First, as already discussed, that would not be consistent with the way in which the receivership application hearing was conducted.

(ww) Second, in her affidavit and her submissions, Ms Lee consistently distinguished between the trust property and the Glen Iris property. Thus when she deposed in her affidavit that she did not intend to sell or encumber the trust property, in our view it is clear that she meant the trust property as previously identified in her affidavit. That did not include the Glen Iris property. The same can be said for the written submissions.

(xx) Third, having rejected the Proposed Undertaking offered in relation to the Glen Iris property, it is not plausible that the receivership applicants may have believed that Ms Lee might still somehow be constrained in relation to her dealings with that property, other than by the existence of the first respondent’s then registered caveat, which was inherently subject to removal by the court, including on balance of convenience grounds. But if they did so believe, we do not think it was Ms Lee’s conduct that induced that belief.

(yy) Fourth, the first respondent has not adduced any evidence to support any finding as to his subjective belief concerning the basis for the resolution of the receivership application and what he understood the effect of that resolution was on Ms Lee’s ability to deal with the Glen Iris property.

Thus in our opinion the judge erred in making the gravamen finding, which was based in part on the Proposed Undertaking. That finding treated Ms Lee as being constrained in the manner she would have been constrained had she given the Proposed Undertaking. A finding of that kind is unsustainable in the face of the rejection of the Proposed Undertaking. The gravamen finding plainly played a significant, if not determinative, role in the judge’s assessment of the balance of convenience and thus his Honour erred in resolving the question of the balance of convenience in the manner in which he did.

Finally, it is appropriate to make some observations about the judge’s reliance on the proposition that Ms Lee was the author of the circumstances she faced. First, a statement of that kind could be made in any case where the registered owner of a property contracts to sell the property prior to removal of a caveat. It is not, in our view, a significant factor in the present case. Second, the same could be said of the receivership applicants (including the first respondent). They were legally represented. Ms Lee offered an undertaking to them and to the Court that she would not deal with the Glen Iris property pending the determination of the substantive proceeding, which would have resulted in contempt of court had Ms Lee acted in breach of it. They rejected that undertaking, choosing to have only the first respondent’s then registered caveat as protection. As already noted, a caveat is inherently subject to removal by court order on balance of convenience grounds.

We note for completeness that no different argument was advanced in relation to the caveats lodged by the second and third respondents. Their case rose and fell with the case based on the first respondent’s caveat.

For these reasons, ground 2 is made out. It is thus not necessary to consider ground 3.

Conclusion

In light of our conclusion that ground 2 succeeds, and the short period of delay in filing her application for leave to appeal, we would grant Ms Lee’s application for an extension of time, grant leave to appeal, and allow the appeal.

There was some discussion at the hearing as to whether, if this Court was to find specific error, it would be appropriate for this Court to make the orders that the judge ought to have made; that is, to exercise afresh the s 90(3) discretion and determine whether to order that the caveats be removed. Ms Lee submitted that the preferable course would be for the Court to exercise the discretion itself, whereas the caveators favoured remittal of the matter.

Given that this Court has before it the evidence and submissions that were before the judge, and given the urgency of the matter because the date for settlement is now long past, we consider it is appropriate to exercise the discretion afresh. That requires consideration of the balance of convenience by reference to that evidence and those submissions, but without regard to the gravamen finding. When that finding is put to one side, in our view the manner in which the receivership application was resolved is irrelevant to the balance of convenience because the resolution simply did not concern the Glen Iris property. As Ms Lee submitted, it was subject to the first respondent’s caveat before the receivership application and it remained subject to the caveat after the receivership application.

Given that it was accepted that the caveators had an arguable case, the question was, as the parties agreed, where the balance of convenience lay. In that regard, Ms Lee will plainly suffer immediate financial prejudice if the caveats are not removed. She will be liable to meet the legal fees and other expenses associated with the sale. She may also be liable to pay the selling agent’s commission and damages to the purchaser.

In contrast, there is no real evidence that the caveators will suffer prejudice if the caveats are removed. While it is true that the beneficiaries of the resulting trusts will lose their beneficial interest in the Glen Iris property, they will obtain a beneficial interest in the net proceeds of sale. There was nothing to suggest that the property had any value other than monetary value to the caveators. They adduced no evidence that the property had any sentimental value, or that any of them wished to retain the property so as to live in it, for example. At its highest, they submitted that the removal of the caveats deprived them of the option that they (if they were found to be beneficiaries of a resulting trust over the property) would have to retain the property rather than selling it. However, while it cannot be said that they had always sought orders in the substantive proceeding that involved the sale of the property, we accept that the orders sought in the most recent statement of claim are predicated on the sale of the property, should it be found to be trust property. Counsel for the first and second respondents accepted as much before the judge, even though he also referred to the possibility that the beneficiaries might resolve to keep the property. That submission is inconsistent with the attitude of the caveators reflected in the correspondence between the parties, in which the caveators stated that they were willing to permit the Glen Iris property to be sold, so long as the proceeds of sale were protected.

In so far as it was said that the property will likely be worth more at the time of the resolution of the substantive proceeding, no evidence was adduced to support that claim. It would be speculative to conclude that that is so. As Ms Lee pointed out, it is possible that the property could be worth less at that time. In so far as the caveators say they should not have to be put in the position of seeking equitable compensation if the property would have been more valuable at the time of judgment in the substantive proceeding than at the time of the impugned sale, we do not consider that to be a significant prejudice. It is true that, if this scenario eventuates, it may involve some inconvenience in perhaps needing again to resort to litigation. But in truth their right to compensation, should events transpire in that manner, is protective of their interests; and, as Ms Lee submitted, the costs of such litigation as might be required could be dealt with by appropriate costs orders, which would fall to be made in light of the various proceedings already instituted.

While we do not agree with Ms Lee that the balance of convenience is ‘all one way’, we accept that the balance of convenience favours the removal of the caveats, so long as appropriate steps are taken to preserve the proceeds of sale to be dealt with in accordance with the resolution of the substantive proceeding. In that regard, Ms Lee’s counsel proffered an undertaking that the proceeds of sale, net of usual sale expenses (which we understand to mean the selling agent’s commission and the legal fees and other expenses associated with the sale), will be preserved in a solicitor’s trust account, or if need be paid into court. We would order that the caveats be removed upon the giving of such an undertaking. We note that counsel made no mention of any deduction of moneys for the discharge of the mortgage, but that was plainly an aspect of the undertaking offered by Ms Lee in the correspondence between the parties; and while there was some debate about that, ultimately it seems that the caveators previously accepted that the mortgage could be discharged from the proceeds of sale. That was reflected in the facts agreed between the parties for the appeal. We can see no reason why such a deduction should not be allowed for. If the parties cannot agree that the net proceeds of sale be paid into a particular solicitor’s trust account, they can be paid into court.

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SCHEDULE OF PARTIES

YEW HAN LEE Applicant

ENG HOCK YAP First Respondent

SAU LIN KAM Second Respondent

ENG HING YAP Third Respondent

THE REGISTRAR OF TITLES Fourth Respondent

Citations

Lee v Yap [2021] VSCA 297

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YEW HAN LEE	Applicant
ENG HOCK YAP	First Respondent
SAU LIN KAM	Second Respondent
ENG HING YAP	Third Respondent
THE REGISTRAR OF TITLES	Fourth Respondent

[2021] VSCA 297

3 November 2021