National Australia Bank Limited v Nilsen
[2018] VSC 368
•2 July 2018, Revised 4 July 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2018 02513
| NATIONAL AUSTRALIA BANK LIMITED (ABN 12 004 044 937) | Plaintiff |
| v | |
| SIRI NILSEN THE REGISTRAR OF TITLES | First Defendant Second Defendant |
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JUDGE: | Kennedy J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 2 July 2018 |
DATE OF JUDGMENT: | 2 July 2018, Revised 4 July 2018 |
CASE MAY BE CITED AS: | National Australia Bank Limited v Nilsen & Anor |
MEDIUM NEUTRAL CITATION: | [2018] VSC 368 |
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REAL PROPERTY – Caveats – Application to remove caveat under s 90(3) Transfer of Land Act 1958 (Vic) - Lodgement of caveat by former de facto based on alleged contributions - Caveat removed by order of court - Lodgement of second caveat allegedly claiming a different interest pursuant to Family Court order – No interest pursuant to order where amount due under order never paid - Balance of convenience also favoured removal of caveat - Unnecessary to decide if second caveat claimed ‘same interest’ in respect of both caveats under s 91(4) – Order for removal made
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T Messer | Thomson Geer |
| For the First Defendant For the Second Defendant | Dr M Wolff No appearance | Ian G Hone -- |
HER HONOUR:
This is an urgent application pursuant to s 90(3) of the Transfer of Land Act 1958 (Vic) (Act) that the second defendant be ordered to remove a caveat lodged on a property at 165 Browns Road, Cranbourne South (Property). The application has been brought by the registered mortgagee in possession, the National Australia Bank Limited (Bank).
The application was opposed by the first defendant, Ms Nilsen, who is the caveator and the former de facto of Mr William Pavlic. Mr Pavlic - a bankrupt - is the administrator of the estate of the registered proprietor (being his mother, Mrs Petrina Rosalia Pavlic).
Background
On or about 31 March 2008 a mortgage was given by the Bank to Mrs Pavlic for a range of facilities. The mortgage was registered shortly thereafter and remains registered on the title.
In August 2010 Mrs Pavlic died and her sole beneficiary, Mr Pavlic, was subsequently granted letters of administration in July 2013.
In about April 2011 a new facility was granted to Mr Pavlic with the Bank’s mortgage identified as security for these new facilities.
During 2013 defaults were made under the facility and demands were served. Mr Pavlic subsequently became a bankrupt.
Then on 3 March 2015, the first defendant lodged a caveat (First Caveat). The grounds that were cited were ‘implied, resulting or constructive trust’.
Subsequently, on 5 April 2017, certain Family Court of Australia orders were made by consent between Ms Nilsen, the trustee in bankruptcy of Mr Pavlic, and Mr Pavlic (Family Court Orders). These provided for the transfer to Ms Nilsen of the Property contemporaneously with the payment of the sum of $550,000 by 5 October 2017.
In the event that the payment was not made, the trustee was given liberty to effect a sale of the Property with the proceeds to be applied such that any encumbrances were paid prior to the payment of any amount to Ms Nilsen.
It was not in dispute that the amount of $550,000 was not paid by 5 October 2017, or at all.
In June 2017 the Bank took possession of the Property and the Property has been vacant since that time. An auction was then postponed at least twice at the request of Ms Nilsen. Despite this she did not begin, and has never begun, any proceeding to establish her claims in relation to the caveat she had lodged.
On 24 March 2016 the Bank entered a contract of sale with a third party purchaser for the sum of $1.32 million. The initial settlement date was supposed to be 24 May 2018 but the settlement date has been postponed on a number of occasions, including most recently on 29 June 2018. The settlement is currently scheduled to take place on 4 July 2018 at 11.30 am.
On 4 June 2018 Justice Richards ordered the removal of the First Caveat.
Then on 8 June 2018 Ms Nilsen lodged another caveat over the Property (Second Caveat). The grounds cited were the same as the first, namely an ‘implied, resulting or constructive trust’.
On 29 June 2018 the Bank then issued this proceeding which was made returnable that day. This was in circumstances where the settlement had been due to take place on 29 June 2018. However, the matter was not disposed of in order to give Ms Nilsen the opportunity to file evidence in relation to this matter. The matter was thus adjourned until 10.30 am today.
Ms Nilsen has filed an affidavit (yesterday). At 10.30 am today, her advisors also sought a further indulgence of the Court for the matter to be stood down, pending arrival of Counsel. In the result, the matter commenced at 1.30 pm.
Legal Principles
Section 90(3) of the Act provides that any person who is adversely affected by a 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.
It was not in dispute that the registered mortgagee is a person ‘adversely affected.’
The relevant principles that guide the Court are set out in the case of Piroshenko v Grojsman[1] (Piroshenko), a decision of Warren CJ . At [7] her Honour states:
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…
[1](2010) 27 VR 489.
In terms of the first link of that test, her Honour further stated (at [18]):
…in order for a caveator to satisfy the first limb of the test applied by the courts when deciding applications under s 90(3) of the Act, he or she must satisfy the court that:
1.there is a probability on the evidence before the court that he or she will be found to have the asserted equitable rights or interest; and
2.that probability is sufficient to justify the practical effect which the caveat has on the ability of the registered proprietor to deal with the property in question in accordance with their normal proprietary rights.
However, her Honour also noted (at [19]) that the two stage test may be somewhat artificial since there is likely to be some overlap.
The principles in Piroshenko have been applied by a number of courts, including the Court of Appeal, for example, in the case of Lawrence & Hanson Group Pty Ltd v Young.[2]
[2][2017] VSCA 172 [36]-[38].
Analysis
Serious question to be tried
In the short affidavit that has been provided to this court, the first defendant appears to rely on two matters.
First, she claims an interest pursuant to the Family Court Order which she says is different from, and arose subsequent to, the interest relied upon for the First Caveat (which was allegedly based on contributions). She accepts that she has not paid the amount the subject of that order, but claims (without any evidence) that the trustee has agreed to ‘extend the time,’ and that the ongoing ‘indulgence of the trustee’ gives rise to an implied, resulting or constructive trust.
Second, she cites various defects in relation to the mortgage held by the Bank, apparently on the basis of hearsay evidence from the bankrupt, Mr Pavlic.
However, in submission this second matter did not appear to be relied upon. Thus, Counsel solely relied upon the Family Court Order (though conceding that his instructions were ‘limited’).
The Family Court Order cannot give rise to any interest in the land in circumstances where no money has been paid as provided for in that order. The ‘indulgence’ cited is insufficient, and there is no evidence of it in any event.
Moreover, any unregistered interest of Ms Nilsen cannot defeat the interest of the Bank as a registered mortgagee in possession (as was helpfully explained in a discussion by Justice Harper in a decision of Perpetual Trustees Victoria Ltd v G Gheorghui[3]).
[3] [2007] VSC 412.
Insofar as the alleged defects in the mortgage are concerned, they have nothing to do with establishment of an interest in the land by Ms Nilsen. There was also nothing raised which would suggest that any such defect would affect the paramountcy of the Bank’s registered interest.
I am therefore unable to be satisfied that any serious question to be tried arises within the principles in Piroshenko.
Balance of convenience
There are also balance of convenience grounds which independently justify removal of the caveat.
The only matter raised by Counsel for Ms Nilsen was that the property should not be sold to a third party until relevant claims in relation to the real estate were resolved. Further, that I should take into account that the real estate in this case was unique.
However, no proprietary claim of any kind has been identified by Ms Nilsen, and certainly none to defeat the registered interest of the Bank. This, despite ample opportunity being given for her to do so. Counsel also failed to identify any evidence to substantiate that the Property had any relevant unique features, which Property has also been vacant for some 12 months.
There are a number of other factors that strongly suggest the caveat should be removed.
First, as has been highlighted by Mr Messer, Counsel for the Bank, there are the interests of the innocent purchaser who has already had settlement of the property delayed (and is seeking costs in relation to that cancelled settlement). Further delay risks ongoing prejudice to the rights of that purchaser.
Secondly, there have already been significant delays in relation to the disposal of this Property. As indicated above, there have been deferrals of the sale date, as well as deferrals of the settlement date.
Thirdly, and despite this delay, Ms Nilsen has not brought proceedings to substantiate her claim.
Fourthly, even if (contrary to the above) Ms Nilsen has a claim which can challenge the Bank’s claims, she may take action against the Bank in damages.
Fifth, she has not paid the money under the Family Court Order she now seeks to rely upon, and there is no evidence to suggest that she has the capacity to do so.
Finally, and importantly, it appears that the money owed is now an amount of some $2.7 million. The best chance of obtaining funds and reducing that amount, together with the ongoing interest, is the realisation of the Property which needs to proceed.
Summary
Having regard to the principles in Piroshenko, the caveat should be removed.
Renewal of caveat in respect of same interest – s 91(4)
There was an alternative basis relied upon by Mr Messer pursuant to s 91(4) of the Act.
Section 91(4) provides that a caveat that has lapsed or been removed by an order of the court shall not be renewed by or on behalf of the same person in respect of the ‘same interest’.
As indicated above, the affidavit relied upon by the first defendant expressly suggests that the interest being relied upon is only that arising from the April 2017 Family Court Order which was made after the lodgement of the First Caveat (in March 2015). This was also the position taken by her Counsel.
Given this position, the better view appears to be that s 91(4) does not have application as, if (contrary to the above) any distinct interest arose from the Order itself, it could not be the subject of a caveat lodged in March 2015.
However, given my findings above and the time constraints, it is unnecessary to consider the matter further. Instead, I am satisfied that the caveat ought be removed pursuant to usual principles under s 90(3).
Conclusion
The caveat lodged on 8 June 2018 will be removed.
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